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Vol:12 Mar/08

Dubai Commercial Space

Dubai Commercial Space
Leasing costs slated to rise by 60% in 2008/09

 The advent of freehold property market has made a very positive impact on Dubai’s commercial and economic growth. This has resulted in Dubai emerging as Asia’s top investment hub. Dubai is currently the primary choice for expanding international companies and businesses. The influx has created a sudden demand for commercial space.



Dubai – Market for office spaces

Our studies estimate Dubai’s current commercial space availability at (app.) 1.72 million square feet. We had carried an earlier news piece on estimating demand of an additional 7.29 million square feet.

Office occupancy has scaled an all-time high of 98-99% with almost zero vacancy levels.

Ceteris paribus, it is estimated that more than 90% of Dubai’s buildings designated for commercial utility are either under construction or recently launched; with most of the developments adopting 'strata' sales. ‘Strata’ refers to a person shown in the Register of the Land Department as the owner of the freehold estate. More often than not, Dubai’s new commercial and residential buildings have multiple strata owners.

Leasing rates in Dubai


 
Location rate in Sq.mt
Jumeirah lake Towers 677
Shaikh zayed road 1055
Al Barsha 795
Karama 526
Deira 825
Dubai Media city 830
Bur Dubai 724
Al Garhoud 790
Tecom 704
(Source: Gowealthy Research Team. Resources include newspaper classifieds, reports from landlords and tenants, online ads)

Leasing charges for Dubai are the highest in the Sheikh Zayed Road area (approx. US$ 1055 per square metre), a prime business district, followed by Deira (approx. US$ 825 per square metre). The afore-mentioned figures have been compiled after analysing statistics from owners and tenants. Upon comparing the present rates with the leasing/rental expenditure in 2007, we predict an increase of more than 60% in the charges, for any newly leased out commercial space in the emirate in 2008-09.

Dubai is in the midst of a major social and economic transformation. This is the result of a developmental phase which is attracting an increasing number of foreign investors and establishments. Investors/organizations consider parameters such as large floor plates, central location, logistical connectivity, technological connectivity, long-term lease options and adequate parking prior to investing.

Complex owner - lesse liaisons

Investors/International organizations seeking commercial space in Dubai prefer to transact with the leaser-developer directly. The complexity of Dubai’s multiple strata owners pose problems for those seeking to transact or interact with a single entity. As is the norm of any investment, developers of Dubai’s major commercial properties pursue short-term gains and strata owners for immediate capital gains.

Logistically speaking !!!

Dubai has grown from a small town-like city into a unique large metropolis. New Dubai now extends from Business Bay to Dubai International Financial Centre (DIFC), Jumeirah Lake Towers (JLT) to Technology and Commerce Free Zone 2 (Tecom 2) and finally from Jebel Ali to Jumeirah South. All these business zones are interlinked by Dubai Metro and by a series of roads that are under construction. The Metro trains have been transported from Japan and are already in Dubai. Test and trial runs are supposed to be operational shortly. Dubai’s government has also identified a globally reputed firm to operate the Metro rail for 10 years.

Below par on parking space

Unlike residential complexes, commercial properties require more parking amenities. The current industry policy in Dubai is to permit parking slots on a ratio of 1 slot for every 50 sqm. With the stabilization of Dubai’s property market in 2010, we foresee stabilization in the allocation of parking bays to commercial enterprises.
Dubai simplifies Strata Law

The Strata Law for Dubai issued on December 31, 2007 is expected to stabilize and steady the emirate’s growing leasing and rental market.

Marwan Bin Ghulaita, CEO of Real Estate Regulatory Authority (RERA) in Dubai says, “The law is designed to handle the day-to-day management of buildings and to overcome the complexities of owners’ association and master community declarations by introducing a simple but comprehensive system of rights and responsibilities. The introduction of the new laws and regulations in Dubai will further protect real estate investors and the community at large, as well as deter potential violators from committing irregularities to achieve profits at the expense of the city."

I. “The strata law relates to the management of common property and shared facilities such as parking, fire services, air conditioning, lifts, pools, gyms, walkways, roadways and gardens, collectively referred to as ‘strata’ in some countries."

II. Regarding the maintenance fees and determination of the responsibilities of the Owners’ Association, the law states that the developer will remain liable for 10 years from the date of issuing the property’s completion certificate for building repairs and curing any defects in the structural elements of the property. The developer also remains liable for 1 year from the date of completion for the mechanical, electrical, sanitary and plumbing installations.

III. Owners’ Association is a special non-profit entity made up of unit owners and formed upon registration of the first unit sale. It has a board elected by a General Assembly (3 to 7 members) and is responsible for the management, maintenance and operation of common areas (such as parking areas, recreational facilities, gardens, lifts, tanks, pipes, generators and water mains, bridges, lakes, fountains and water features).


The story will be continued next week, as we analyse the existing price structure of offices in Dubai. Also to be featured is the first quarterly review of real estate sales in Dubai in '08.