Driving value from office space was the key theme during Q1 2019
The office market activity in Dubai continued to soften during Q1 2019. Much of the demand was driven by consolidation and space optimization strategy by corporate occupiers that are streamlining their business to better service their local and regional clients. The majority of enquiry levels and transactions were for small and medium sized office space. Demand for new large sized office space remains limited except in the case of consolidation. Supply addition was stable which led to an increase in vacancy levels across select micro-markets.
Driving value from office space was the key theme during Q1 2019 and this included lease regears, achieving rental savings on renewal, consolidating and right-sizing where relevant. The current market dynamics proved favorable for occupiers as the existing vacancy levels and weak demand resulted in landlords offering flexible commercial terms. Generous rent-free periods, additional car parking, lease flexibility through increased break opportunities with minimal penalties and even upgraded space from shell and core to Category A fit-out (CAT A) were among the options offered as part of the lease discussion.
Many corporate occupiers, however, adopted a wait-and-see approach and committed to shorter lease terms at renewals. On the positive side, expansion led enquiry levels have picked-up especially from companies in the Media /Tech and co-working space.