Moving not easy for office tenants

Businesses find shifting licences and longer term contracts is no easy process

Businesses in Dubai are finding that it’s not as easy as it seems to shift from their current office address to another. And even when it comes to shifting from one free zone to another.

“There is a reasonable level of pent-up demand being restricted currently,” says a new office property update from Knight Frank. “First, due to the restrictions in transferring licences from one free zone to another, demand for which is increasing due to the continuing roll-out of dual-licencing in freezones.

“Secondly, whilst some occupiers are willing to undertake these moves, many are in long-term contracts which further restrict demand.”

Clearly, landlords are not going to give up easily on their tenants at a time when demand for offices is at best uncertain. Across the city, office rents are down 4.9 per cent from the start of the year up to the third quarter. If only Grade A properties are considered, the decline is steeper — 8.9 per cent from January levels.

“This rate is likely to continue to slide given a range of Grade A office supply due to enter the market and existing vacancy,” the report adds.

Among office categories that have done relatively better are those in super-prime locations. Prime office rents in the third quarter were Dh246 a square foot, down 4.9 per cent in the year to now. But on the plus side, vacancies in these properties are “as low as 1 per cent”.

In the third quarter, demand for offices was soft.