As the CEO of CenCorp, Ryan Mahoney (Dubai, UAE) presides over a conglomerate of property-related businesses, as well as serving as CEO of Better Homes. This article will look at how office rents in Dubai have stabilized against a backdrop of economic recovery and job creation.
Over the next five years, analysts predict that the technology, telecoms, logistics and media sectors will create somewhere in the region of 100,000 new jobs in the United Arab Emirates. Property consultancy Knight Frank recently drew correlations between the boom seen in these sectors and the stabilization of Dubai office rents in the second quarter of 2021.
As the United Arab Emirates recovers from the impact of the COVID-19 pandemic, spurred on by a raft of government initiatives, rents have risen in several key areas of Dubai, including Business Bay, Dubai Hills, The Greens, Downtown Jebel Ali, and Dubai Media City.
Meanwhile, 14 out of 26 submarkets registered no quarterly change, according to Knight Frank’s report. The property consultancy highlighted the role of the technology, media and telecoms (or TMT) sector in terms of underpinning office requirements as the market thawed, following an extended period of COVID-19-induced stasis – underlining the TMT sector’s importance as the sector with the fastest rate of job creation.
Overall, the report’s findings do suggest that with office rents hovering at a nine-year low, occupiers remain in the driving seat. Nevertheless, new requirements for office space increased by 11.2% in the second quarter of 2021, rising from 16,954 to 18,859 square meters over the space of a single quarter.
Downtown Jebel Ali saw the largest office rent increases during that timeframe, increasing by 8.3% compared with the previous quarter to $17.69 a square foot. Rents in Business Bay increased by 4.4%, while The Greens saw a 6.1% increase. The TMT sector accounted for the lion’s share of the boom seen in the second quarter of 2021, accounting for 22.1%, followed by design and architecture firms and the hospitality sector, accounting for 19.2% and 9.9% respectively.
Most TMT requirements centered around city center locations, such as Downtown Dubai, Business Bay, the Dubai International Financial Center, and Sheikh Zayed Road. On June 1st 2021, a new 100% company foreign ownership law came into effect, which the report suggested would have a significant impact on medium to long-term demand for office space in key markets such as Abu Dhabi and Dubai, as they slowly recover from the aftermath of the pandemic.
Last year, the United Arab Emirates reviewed its commercial company laws, removing the requirement for onshore companies to have an Emirate shareholder, potentially rendering several industrial sectors much more attractive to foreign investors. The move was designed to boost the country’s competitive advantage, as well as providing the Arab world’s second-largest economy with an injection of foreign capital.
Knight Frank did not predict that the changes to commercial company ownership laws would spark an exodus from the city’s free zones. Rather, the report suggested that the amendment was largely designed to benefit the manufacturing sector, explaining that most free zone locations confer numerous advantages over onshore locations including access to world-class transport and logistics infrastructure, free zone-specific tax advantages, and agglomeration benefits.
The United Arab Emirates Central Bank predicted that the UAE’s economy would grow by 2.4% in 2021, as the country recovered from COVID-19. Thanks to the new measures put in place by the government, combined with Dubai’s global reputation as one of the most rapidly-growing cities in the world, the emirate is becoming an increasingly attractive option for global investors.
Home to more than 120 different nationalities today, Dubai’s economic and political stability have positioned it as an optimum choice for global real estate investors.
