Dubai: Dubai has absorbed more per capita office space than any major city in the world over the past two-and-a-half years, according to a report by global real estate advisory firm Jones Lang LaSalle.
The research, which compared data on 25 global cities, reveals that Dubai is the fastest growing office market in the world on a per capita basis, with the total area of occupied Grade A quality office space increasing by 2.8 square feet per capita since the beginning of 2008.
While other markets have grown by much more in absolute numbers, these are far larger mega cities, hence Dubai scores highest in terms of net absorption (the change in occupied office space) per capita.
“However, the city has also witnessed a massive oversupply of commercial properties within this period that is putting downward pressure on prices — that’s another story,” Blair Hagkull, chairman of Jones Lang LaSalle Mena told a breakfast meeting of Dubai Properties Group this week.
Dubai Properties Group, an industry association representing property developers and brokers in Dubai, has been holding regular meetings with key officials to update them on the current market situation.
Adel Lootah, executive director of the group, said: “The property market is stabilising in some areas.”
International comparisons are notoriously difficult, given the different geographical coverage and definitions adopted in different real estate markets globally, the report says.
The total occupied stock of offices in those areas of Dubai monitored by Jones Lang LaSalle is estimated to have increased by around 42 per cent since January 2008.
This places Dubai in fifth place globally when assessed against the pace of growth of other office markets monitored by Jones Lang LaSalle.
Strong net absorption
The fastest growing cities globally on this measure have been Delhi (61 per cent), Mumbai (58 per cent), Beijing (56 per cent) and Bangalore (43 per cent), which have all experienced a strong net absorption as their stock of international quality office space has expanded rapidly from a previous low base.
“The major factor driving the Dubai office market at the current time is not the absence of demand, which remains positive, but the excessive levels of new supply that have entered the market in recent years,” Hagkull said.
“The total stock of office space in Dubai increased 2.5 times over the past three years — from around 20 million square metres at the end of 2007 to its current level of around 50 million square feet.
“This has resulted in Dubai having one of the highest levels of office space per person of any city in the world.
“Dubai’s current provision rate [the level of office space per capita] is around 36 square feet, which is fourth only to New York, Paris and London.”
He said, due to oversupply, currently about 40 per cent of the commercial properties are vacant.
Industry officials observed, although other sectors, such as trade, tourism and retail, are witnessing recovery, the real estate sector will take time to come back.
Charles Neil, CEO of Landmark Properties, said: “In many areas, developers, contractors and buyers are locked in disputes over half-finished projects. However, almost all sub-developers are facing problems over payments even on completed projects.”
Banks have repossessed a lot of housing units due to the failure of the home buyers in honouring their payment obligations.
“Banks are repossessing assets and are leasing them out as there are not many takers for freehold properties,” Neil said.
This might lead to banks entering the property market in a bigger way — to manage the assets better.
He said, although most banks might still make provisions for losses, many of them will start lending this year.
42% increase in Dubai offices since January 2008
40% of commercial properties vacant due to oversupply