An emirate used to flashy projects tries to appeal to exacting tenants
The “build-to-suit” market in Dubai is taking off.
In an emirate where sky is the limit for construction projects, developers are creating buildings to fit the needs of single tenants, as opposed to tenants’ specifications having to contort to buildings of aesthetic value.
“Tenant demand is dictating what office buildings look like,” said Craig Plumb, Head of Research for MENA at Jones Lang LaSalle. “Tenants want efficient floors and good natural light; they don’t want to pay for large areas they can’t use. For example, they’re seeking traditional square buildings instead of curved ones, which are notoriously inefficient because you can’t fit desks in every area.”
Dubai has gained a reputation over the past decade for iconic, superlative projects that bend design and form. “Developers basically had an open cheque book to design flashy buildings,” said Plumb.
Despite the drop of petroleum prices worldwide, real estate transactions in the emirate are on the rise, hitting AED77 billion (USD20.9 billion) in the first quarter of 2017, compared with AED54.7 billion in 2016, the Dubai Land Department reported.
Areas such as TECOM’s Internet City and Media City remain in high demand and boast stable rental prices, Cluttons Dubai reported. “A limited supply pipeline in both markets is clearly supporting the stability in rents,” reported Murray Strang, head of Cluttons Dubai.
Grade A office buildings with single tenants such as HSBC’s future Middle East headquarters and the Standard Chartered Tower are gaining traction. Several developers have been compelled to buy back floors in office buildings with multiple tenants. “But the majority are still in multiple ownership and are difficult to manage,” Plumb reported. “It’s not easy to adapt these offices so developers are building new offices that are more functional and that are in single ownership.
Dubai remains a lure to multinational business locators as the emirate does not impose corporation taxes. The UAE is known for not levying personal taxes, as well as income taxes, capital gains taxes and death taxes.
“Dubai is strengthening its position as the number one Middle East business hub,” said Dana Williamson, head of agency for MENA at JLL. “Many companies are setting up their regional or global headquarters in Dubai and this is unlikely to change any time soon.”