Low demand leads to plunge in rents in new free zones
As per CB Richard Ellis Middle East, despite when Dubai International Financial Centre (DIFC) continued to lease at high rates, an enormous decline was experienced by new free zone areas such as Jumeriah Lakes Towers (JLT) and Dubai Silicon Oasis (DSO).
The major reason for the notable drop in lease rates for Dubai's free zones was falling demand for office space and significant new supply over the past nine months.
Mohammed Faheem, Research Analyst, CB Richard Ellis Middle East said, "This has created a ripple effect that has steadily moved towards the emerging new free zones, which offer office space on a freehold basis."
Rents were Dh240-280 per square feet in third quarter of 2008 in JLT on average. However, they are now being offered at Dh70-120 per sq ft.
But the thing to note is that there was a significant supply factor in the development during the third quarter of 2008 with just 2.5 million sq ft across eight towers. Over the past year, this space doubled with close to 5.2 million sq ft.
Faheem said, "Additional space along with weak demand has resulted in a drop of 63 per cent in lease rates. Office space from private developers in DSO is typically offered at Dh50 to Dh80 sq ft while in Tecom C the rents are in the range of Dh85-130 per sq ft."
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