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Why Dubai firms are benefiting from lower office rents, incentives

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Businesses are benefitting from Dubai’s lower rental costs and generous location incentives, according to the latest research by Savills.

Its Dubai Office Market report has highlighted that the current market dynamics are favouring occupiers and that landlords are offering a range of benefits to entice organisations and entrepreneurs.

Average rents in Dubai International Financial Centre (DIFC) were the highest at about AED200/sq ft/annum, with DAFZA and Downtown Dubai at AED135–170, Media City and Internet City at AED160 and Sheikh Zayed Road averages at AED140.

Paula Walshe, director for International Corporate Services for Savills, said: “Dubai is already an attractive hub for global corporations and while office market activity has softened in the first quarter of the year, the city offers an increasingly beneficial operating environment for businesses.

“With lower rents, a range of quality developments available and landlords taking a more flexible approach to leasing, both domestic and international organisations are well-placed to take advantage of Dubai’s business-friendly rental environment.”

Savills also said new providers are entering the serviced office sector, with improved legislation allowing these providers to operate in the region more freely.

It added that there is also an increasing trend towards co-working spaces catered towards start-ups and tech entrepreneurship, where open desk spaces offer more cost-effective solutions for fledgling companies.

Walshe said: “There is a culture for entrepreneurship in the UAE, as the economy diversifies away from oil-based industries and moves towards technology and knowledge-based start-ups as set out in the UAE Vision 2021. It is clear that such trends are affecting the Dubai office market and that landlords must keep pace with the changing business demands in order to stay profitable and ensure continued occupancy of their office spaces.”

Savills also noted that demand for small and medium sized offices has outstripped the demand for larger office spaces, as businesses choose to streamline their operations.

To incentivise occupiers, landlords have become more flexible, with approaches such as rent-free periods, offering extended car parking facilities, shorter lease terms and even upgrading shell and core spaces to Category A fit-outs to secure agreements.
Savills predicted that supply will continue to outpace demand through 2019, meaning developers and landlords will continue to offer such benefits to tenants.

The most stable sub-sector is good quality prime buildings, with demand remaining more consistent and therefore holding more stable rental values.


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