Dubai media and tech firms drive demand for office space

Landlords offer generous incentives in renters' market, Savills report says

Dubai Design District is hosting a restaurant week at the start of the month. Courtesy D3 

Media, technology and other knowledge-based industries fuel demand for Dubai office real estate, as traditional corporate occupiers "wait and see" amid a slower market, according to a report by property consultancy Savills.

“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,” said Paula Walshe, director for international corporate services at Savills.

“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.”

Office market activity in Dubai continued to soften during the first quarter of 2019, Savills’ report showed. Office rents fell by around 2 to 6 per cent year-on-year on average across the emirate, with larger declines of over 10 per cent seen in Bur Dubai and Dubai Science Park.

Rents in Dubai International Financial Centre, the emirate’s financial services free zone, fell by 2 per cent year-on-year in the quarter, and in Downtown Dubai by 3.3 per cent. The Dubai Design District – which finished its first development phase in 2015 and where many new creative companies have set up operations – was the only area where rents increased, by 13.8 per cent year-on-year, according to the report.

Among corporate occupiers in traditional service industries, much of the demand was driven by consolidation and space optimisation, as companies sought to streamline their business to better service local and regional clients in an increasingly mature and competitive market, Savills said.

The majority of enquiries and transactions were for small and medium-sized office spaces. Enquiries picked up among companies in the fast-growing sectors of media and technology.

There is also an increasing trend towards co-working spaces that cater to start-ups and tech entrepreneurship, where open spaces offer more cost-effective solutions for fledgling companies and freelancers.

“Many corporate occupiers adopted a wait-and-see approach and committed to shorter lease terms at renewals,” Savills said. “Media and tech enterprises and co-working spaces are the key drivers seeking expansion of office space.”

Current market conditions are favourable for all types of office occupiers, the report added, as landlords offer incentives such as rent-free periods, flexible lease lengths, free upgrades for shell-and-core spaces that still need fit out, and expanded parking facilities.

Improved legislation such as dual licensing for onshore and offshore entities are also allowing office occupiers to operate across the emirate more freely.

The report predicted that supply will continue to outpace demand through 2019, meaning developers and landlords will continue to offer such benefits to tenants.

“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,” Ms Walshe said.

“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.”