Drop by approx 63% in Dubai freezone office rates

On Tuesday, a new report from CB Richard Ellis Middle East said that in some of Dubai's freezone areas, the lease rates for offices have decreased to nearly 63% year-on-year.

The report added that freezones, which gives profit including 100% repatriation of capital and profits, multi-year leases, and assistance in labor recruitment, experienced fall in demand for office space during the global crisis.

CB Richard Ellis said that new freezones at Dubai International Financial Centre (DIFC), Jumeirah Lake Towers, Dubai Healthcare City and Dubai Silicon Oasis emerged after the success of freezones, such as TECOM and Jebel Ali. However, the new freezones are now striving hard amidst lower demand.

An enormous drop in lease rates for Dubai's freezones has been seen by the research company in the last nine months.

The report added, "Decline has been felt the most in the emerging new freezone areas of Jumeriah Lakes Towers and Dubai Silicon Oasis, which have suffered heavy drop in price since the beginning of this year."

It also said that the decline in sales rates saw the individual owners extending holding periods, and deciding to lease their properties instead of looking to sell.

On an average, in the third quarter of 2008, the JLT rents decreased from AED240-280 per sq ft to a present rate of AED70-120 per sq ft.

The report said that a massive hike in available office space (from about 2.5m sq ft in Q3 2008 to 5.2m sq ft) had led to weak demand and a fall of 63% in lease rates.

The report concluded, "During the remainder of the year and into 2010 we expect the leasing market in these areas to remain sluggish, largely due to additional pipeline stock expected to enter from freezone developments as well as non-freezone areas such as Business Bay development."