Dubai the region’s top performer in prime office rental growth, says JLL
Rents on prime office assets across the MENA region continued to increase at around the same pace recording an average growth of 11.3%pa in the year to Q2 2016 compared to 11.9%pa in the year to Q1.This confirms the ‘2 tiered’ nature of the market across the region with demand for space in ‘prime’ buildings in each city remaining the preferred option. According to JLL’s Office Global Index Report, Dubai ranks as the region’s top performer over the year with a growth of 20% – Dubai International Financial Centre (DIFC) reported as the Emirate’s prime office location – followed by Cairo at 16.7%.
“Office demand is proving resilient in many of the world’s dominant commercial real estate markets despite increased political and economic uncertainty which is leading to corporate occupiers striking a more cautious tone,” said Jeremy Kelly, Director in Global Research Programmes, JLL. “Underlying market fundamentals are sound, and corporate demand remains strong, notably in Dubai as office vacancy rates continue to decline in the DIFC. As a result, we have witnessed a boost in rental values within the DIFC unlike other locations where rental values have remained largely unchanged.”
In terms of overall performance and demand in Q2 for Dubai, the Central Business District (CBD) remains popular. This is evident through the high rental rates that currently average at around AED 1,922 per square metre meeting low vacancy levels.
Cairo secured second place, also displaying robust growth of 16.7% in the year to Q2 . In contrast to Dubai, the city’s office rental growth was largely driven by relocations to higher quality spaces in more convenient locations.
Rental growth in MENA over the next six months
These two dominant commercial real estate markets in the MENA region have manoeuvred well through the political and economic storms of 2016 with Brexit being a potential unbalancing element in Q2. Whilst some markets have struggled to maintain a positive momentum, many have remained remarkably robust and continue to expand as seen in the case of Dubai and Cairo in the MENA region.
Looking towards the second half of the year, prime rents are mainly projected to remain stable in MENA over 2016, as new supply continues to enter the markets. The general trend of ‘2-tiered’ markets and solid demand for Grade A space with limited interest in secondary locations will continue to persist.
“In Dubai, rental growth is predicted to move into further positive territory during the second half of the year, and low vacancy rates coupled with little interest in occupying alternative space will continue to prevent substantial fall in rents,” added Kelly. “Our priority for the second half of the year is to continue to analyse developments in MENA in order to provide our clients with the most accurate and up-to-date information possible to shape and inform their real estate strategies across the region.”
These key findings were taken from JLL’s Office Global Index Report, which analyses the state of the rental markets worldwide on a quarter-on-quarter basis. The report highlights the rental growth in offices of major cities across Europe, MENA, Americas and Asia Pacific.