If you stay at the top of the Dubai real estate news, you might now that the residential sector in Dubai has clearly outperformed its office sector through out all the consecutive quarters of 2018. Those, who are satisfied about the current performance of Dubai real estate and predicting better times ahead, should not forget the root cause of real estate collapse in Dubai.
Lack of business opportunities brought the once spectacular Dubai real estate sector to death. The overall real estate market will remain poor unless government creates better employment opportunities in Dubai. The office market seems to be in pressure in Dubai, which clearly shows that the problem of unemployment still exists in the economy.
Office market in Dubai
Though office rents in Dubai remained static through out all the quarters in 2018, yet the new office space constantly being added in the market is preventing the sector to show quick recovery. The lower demand and the high supply in the market is adding pressure to the vacancy rates. Based on the performance of the market during 2018, it is expected that that office market will continue to remain in pressure during 2019.
According to a new report, the Dubai rental rates remained in the range of Dh.1080 to Dh. 1940 per square meter annually during the fourth quarter of the previous year. Since, the buyers are now looking forward to having only quality properties so the offices in the prime locations outperformed the office in the secondary locations. The rents in the secondary locations dropped by around 11% in 2017 as compared to 30% decline recorded in the previous year.
Almost 58,000 square feet of the office space was added to the market during 2018, which highly increased the vacancy rates. Despite the situation, landlords are still hesitant to offer incentives to the tenants with only few landlords considering to offer rent free periods on long term tenancy contracts.
During the year 2018, approximately 750,000 square meter of office space has been scheduled for completion without any construction delays, which is expected to keep the office market in pressure through out the year. The vacancy rates would increase but they would not affect the lease rates unless government takes in time corrective action to fix the issue of oversupply in the office market.
Though the heavy supply would be added to the secondary office market, yet this oversupply if not controlled seriously cannot only deteriorate the office market in Dubai but it can also affect the residential sector of Dubai real estate. That would be the time when there would be nothing to cheer about Dubai real estate and to avoid it, government must block the news supply scheduled to add to the market during the year.