Demand for ‘quality’ office space on rise in Dubai

Excess supply in secondary office locations across Dubai may be pulling down rents and occupancy levels there, but “flight to quality” has resulted in increased demand for ‘A’ grade office space.

Limitless, the Dubai-government owned developer, said on Sunday it has already leased half of the available office space in its fourth commercial building in The Galleries — a cue to the growing demand for “quality” office space.

Office occupancy at Limitless’ flagship project is approaching three-quarters across all four Galleries towers. Half of the available office space in the new tower has been leased by an Al Gaith-owned entity, currently fitting out seven entire floors and covering an area of 94,000 square feet. In addition, Switzerland-based pharmaceutical firm Hoffmann La Roche has secured a full floor (15,500 sqft) of corporate space in the tower.

Rental rates are negotiable, depending on size and length of lease with the developer offering tenants the option of a free zone and a non-free zone license.

Bahaa Abouhatab, Head of Projects for Limitless in the UAE, said: “All four of our commercial towers now open, and are increasingly being taken by global and local firms who want the A-grade office accommodation. The first three months of this year has been a hive of activity for us, and we look forward to more milestones throughout 2012.”

The Galleries is an eight-building mixed-use development set among landscaped, communal grounds spanning 215,000 sq feet.  Total office and retail space across all four Galleries buildings is 789,000 sqft and 68,000 sqft, respectively, out of which 547,541 sqft and 27,309 sqft space has been leased.

In its first quarter 2012 report on Dubai property market, Asteco said that rental rates in Downtown Jebel Ali’s The Galleries have increased as a result of occupancy reaching 75 per cent across the three Grade A commercial towers, with more leases being finalised.

Matthew Green, the Head of Research and Consultancy at CB Richard Ellis Middle East, has said that occupiers continue to seek a “flight to quality”, which has resulted in prime CBD offices outperforming the wider market over the past year.

Prime (CBD) office rents have now remained unchanged for four straight quarters but the stress on secondary office locations continues with lease and occupancy rates sliding on excessive supply, he informed.

Asteco, however, said the commercial market was still a long way away in terms of reaching stability/recovery, as oversupply will continue to adversely affect rates.

What is Grade A?

US-based Building Owners and Managers Association International says Class A office buildings have the "most prestigious buildings competing for premier office users with rents above average for the area." Class A facilities have "high quality standard finishes, state of the art systems, exceptional accessibility and a definite market presence."

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