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DIFC rents second highest in Europe, Mideast and Africa
posted on 18/03/2010
 Prime office rents in Dubai International Financial Centre (DIFC) remain the second highest market rate in the Europe, Middle East and Africa (Emea) region, according to CB Richard Ellis (CBRE).
Latest figures from CBRE on the office market view for the fourth quarter of 2009 for Emea showed that rents in DIFC are at €819 (Dh4,114) per square metre per annum, the second highest market rate in Emea.
London's West End at €972 per sqm per annum took the top position for Emea. According to CBRE, other cities that make up the top five are Paris in number three position at €720 per sqm per annum, Moscow in the fourth position at €594 per sqm per annum and Geneva and Zurich jointly in the fifth position at €573 per sqm per annum.
"Relative to the rest of its Emea neighbours, the 12-month loss for DIFC has been somewhat less drastic. Moscow has lost 43.3 per cent of its value, followed closely by Dublin at 39.6 per cent and St Petersburg 38.5 per cent. Dubai's DIFC lost 27.3 per cent of its value, while London West End fared better, losing just 17.9 per cent of its value," said the report.
"Rents within the DIFC Freezone have seen a level of protection during the downturn. However, we are now starting to see some movement in negotiation levels within both DIFCA and privately managed buildings," said Matthew Green, Head of Research UAE, CB Richard Ellis Middle East.
"The local market environment will continue to face new challenges during 2010 and this is sure to create additional cost implications for occupiers, especially those in prime locations such as the DIFC. It will thus be the responsibility of the DIFCA and the estate management to effectively mitigate and govern the situation by acknowledging and responding to market pressures, in order to maintain focus, retain current tenants and to continue to attract new global brands in the future," he said.
Meanwhile, according to CBRE, the fourth quarter of 2009 witnessed an increase in occupier interest and activity as office market conditions in Dubai moved further in tenants' favour. The CBRE report further revealed that office occupiers in a number of markets across the Emea remain well-placed to negotiate favourable terms with landlords.
"Landlords are now increasingly willing to offer incentives in the form of longer rent-free periods alongside lower face rents. The impact of new supply in the CBD is forcing landlords in non-prime locations to reduce their rents more aggressively to try and stay competitive against better located and higher quality buildings. The typical lease length in Dubai is now around three years with a rent-free period of two months. The UK has the highest average term in Emea at 10 years, while the Emea average is between three to five years."
The Abu Dhabi market is estimated to approximately hand over 390,000 sqm of new internationally recognisable 'Grade A' office accommodation by 2011.
Although this huge amount of space will be delivered in a relatively short time period, it is expected take-up levels will be strong as tenants migrate from low quality existing accommodation in converted residential towers and villas to high quality office buildings.
However, with rents beginning to find a floor in a number of markets, this situation is highly dynamic and tenants' advantage may be short-lived. While rents across Emea continue to fall, the rate of decline is slowing.
Meanwhile, the CB Richard Ellis EU-27 office rent index moved down just one per cent in the fourth quarter of 2009, taking the annual change to -9.2 per cent.
At individual market level, the rental pattern remains uneven. London led the Emea region's rental recovery at the end of 2009 as rents in the City of London rose by 3.5 per cent in the fourth quarter. This partly reflects a shortage of space options over 10,000 sqm which contrasts with a greater choice of units below 2,500 sqm effectively a two-tier market. A significant number of other markets, including Paris, Berlin and Stockholm, are now seeing the rate of rental decline slowing significantly.
Matt Pullen, Head of Emea Global Corporate Services, CBRE, said: "Cost-cutting, rationalisation and re-gearing remain the key drivers of tenant activity in a large number of office markets. Despite rental growth in London and stabilising rents across many other markets in Emea, opportunities to negotiate more favourable terms still exist, although these may be short-lived so need to be acted upon quickly. Most markets across Emea should see demand stabilise or improve in 2010."
According to the Emea Office MarketView, aggregate vacancy levels continue to rise, but in many markets the rate of increase has slowed. This has been spurred by previous low levels of demand which restricted the scale of office development, and in some cases has prompted office conversions to hotel or residential use. – Emirates Business 24|7
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