Dubai’s office market set for a short-term slowdown amid corporate consolidations and staff cuts, says Faisal Durrani, head of research at the UK’s Cluttons.

“In the short-term the Dubai office market is set for a slowdown in certain areas off the back of the macro-economic outlook for the region,” says Durrani. “Despite this, it is difficult to forecast whether this will be applicable for the entire emirate as different areas continue to perform differently.”

The Cluttons report has split up Dubai’s office market into four sub-markets; New Dubai, Old Dubai, Dubai fringe and central Dubai.

Durrani says the reasoning behind Cluttons segmentation of the market is due to the fragmented performance of different areas. “Dubai’s market continues to perform differently but an overriding theme is that occupants are becoming increasingly price conscious.”

“International occupiers continue to be attracted by freezone areas with the Dubai Trade Centre District amongst the most active submarkets,” says Durrani.

Demand in office rents across the majority of Dubai’s main sub-markets has persisted in throughout 2015, according to the report.

The highest rent increases in Dubai were recording in Design District (D3), where freezone and non-freezone metre-by-metre rents rose by 67 per cent and 44 per cent, says the report.

Although staff cuts and the scaling back of operations across a number of sectors amid a slowing economy have had an impact on the market, Durrani says that the same trend has also resulted in companies consolidating their operations and therefore taking up larger spaces under single landlords.

“A trend we are seeing at the moment is that occupiers are looking to sign more flexible contracts with landlords to ensure they are able to leave if need be. At the same time landlords are finding occupiers who want larger spaces as companies consolidate operations,” says Murray Strang, director and head of investment and agency at Cluttons.

In saying this, Durrani projects a more positive medium-to-short term outlook for Dubai’s office market and cites the opening up of the Iranian market as a key development that will boost the emirate.

“Iran opening up will undoubtably have a positive impact on Dubai’s economy. The two share a history of trade relations and now as international companies eye up Iran, Dubai offers a springboard location for companies who may not want to fully commit full time operations in Iran,” explains Durrani.

Clutton’s four submarkets that make up Dubai office space 
 Source: Cluttons 
New Dubai The strongest perfroming submarket during 2015 was Tecom DIC/DMC/DKV. 
10 per cent increase in lower limit rents 
13 per cent increase in higher limit rents 
Old Dubai  Majority of stock comprised of older buildings 
Remains a hub for local business with a steady strem of deman 
Bur Dubai witnessed 20 per cent rise in lower limit 
Central Dubai  Two new freezones launched in the past 18 months (DTCD and D3)
D3 lower limit rents increased by 67 per cent 
Phase 2 and 3 of DTCD expected within two years 
Dubai Fringe  Fringe locations are the first to feel the impact of a flattening market
Silicon Oasis strata stock higher limit rents increase by 56 per cent 
Dubai South set to house Expo sight and Al-Maktoum Airport