Monday, January 23, 2017

Dubai government's innovation drive spurs office sector

Dubai government’s ambitious innovation drive and the desire to position the city as the region’s leading tech hub with major focus on the technology-media-telecoms (TMT) sector has undoubtedly fueled activity in the city's office sector, said a report.

Spurred by the government’s innovation drive and desire to position the city as the region’s leading tech hub, real estate indicators show that the technology-media-telecoms (TMT) sector is amongst the most active in Dubai,  according to international real estate consultancy, Cluttons

The government’s push for this sector has undoubtedly fueled activity in this increasingly significant area, where high levels of expansionary activity have been recorded, stated Cluttons in its bi-annual Dubai Office Market Bulletin for Spring 2017.

Faisal Durrani, the head of research at Cluttons, pointed out that the rising star in the office occupier market was certainly the TMT sector and the Internet City and Media City remained the core focus of this rapidly expanding and ever important sector for Dubai’s economy.

"The government’s recent Future-Accelerators Programme is paving the way for further strong expansion in this area over the short term. However, with limited amount of space available in high demand locations, interest is likely to rise in complimentary free-zones such as Dubai Science Park," remarked Durrani.

"Samsung, for example, has recently trebled its floor space, while Amazon Web Services announced plans to establish a new Middle East office in the emirate as it works to grow its presence in the region," he stated.

"While 2016 was broadly punctuated by high levels of consolidation activity, notably from the oil and gas sector, but also existing occupiers looking at efficiencies through single-hub operations, a lot of that activity has all but subsided," he added.

According to Cluttons’ Dubai Bulletin, overall activity in Dubai’s office market remains muted.

Throughout the course of 2016, 10 of the 23 submarkets Cluttons monitor registered decreases in upper limit rental rates, with Garhoud (Dh90 per sq ft) ending the year 18.2 per cent down while Al Barsha (-10 per cent) and Deira (-9.1 per cent) were the next weakest performers, stated the property expert.

On the other hand, DIFC (Dh370 per sq ft) emerged as the city’s best performer last year, with upper limit rents rising by 5.7 per cent.

Cluttons’ research indicates that these upper limit rents are reflective of rates in and around the Gate core, where as standalone third party schemes continue to command higher vacancy rates and lower rents.

According to Cluttons, DIFC aims to continue its successful performance in 2017 through the recently announced launch of the first FinTech accelerator in the Middle East in the first quarter of this year.

The FinTech accelerator will bring cutting-edge financial services technology to the regional markets, while providing a platform that brings financial and technology firms together, it stated.

Murray Strang, the head of Cluttons Dubai, said: "Looking ahead, ‘The Avenue’, DIFC’s retail parade, is expected to spur overall activity and take up across the district. It is expected to bring increased connectivity as DIFC matures into a more pedestrian friendly environment. For now, core buildings command very low vacancy rates of sub 5 per cent and we expect this to persist."

"The shortage of space in this part of DIFC is hampering activity, however we have recorded a few small relocation deals within the finance and banking sector of under 3,000 sq ft," he noted.

Strang pointed out that no supply relief was likely until early 2019, when the $1-billion ICD Brookfield Place is expected to be completed. The development will provide 900,000 sq ft of Grade A space.

"Nearby, One Central may offer further significant Grade A space when a further two buildings in phase 2 complete later this year," he added.-TradeArabia News Service

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