Dubai ranks 17th in office rents worldwide
Filed on October 16, 2015 | Last updated on October 16, 2015 at 06.55 am
London’s skyscrapers record highest level of rental growth globally
Dubai is the world’s 17th most expensive place to rent an office in a tower while Hong Kong remains the world’s top expensive city, according to a report released on Wednesday.
While London skyscrapers have seen rents increase by more than 10 per cent in six months, Dubai skyscrapers did not record rent hikes in the same period, according to Knight Frank which on Thursday issued Global Cities: The 2016 Report.
Hong Kong still tops the ranking with a prime rent of $255.50 per sq. ft., over $100 more expensive than New York which sits in second place with a rent of $153 per sq. ft. while Dubai’s prime office rent remains $43.5 per sq. ft.
The report, which reflects the cost of renting office space in tower buildings across key global cities, explains that London’s growth is partly due to a buoyant occupier market, which has seen vacancy rates reach the lowest level since 2001. Closely following London’s growth is San Francisco, which witnessed an increase of over eight per cent considerably more than any other US city, as the city continues to benefit from its ever-expanding tech sector.
Hong Kong’s large lead in the index can be attributed to a variety of factors, such as the restricted geographic area of the city which results in developers having to convert air into ‘land’ and build upwards.
“Occupier confidence has obviously played a major part in the increase in tower rents achieved across most of the major global cities. However, the main point of interest is that this confidence has coincided with occupiers being more prepared to compete for space that was traditionally outside their preferred locations, ‘said William Beardmore-Gray, global head of office agency.
Global Cities: The 2016 Report sets the context for investors by saying that five new cities, each the size of Los Angeles, will need to be built every year for the next five years to accommodate the expected 380 million new city dwellers. The report predicts that the number of people moving to cities over the next five years will be more than three times the current population of Japan, as they try to make the most of the economic advantages cities increasingly deliver.
The report argued that retail success in global cities depends on a tailored approach.
The key incentive for retailers to make the global transition is growth. However, the global playing field is anything but even. The report shows that of the major global economies, the US holds the largest retail format sales per capita at $11,687, whereas India sits at the other end of the spectrum with just $793.
From a Dubai perspective, Diaa Noufal, Mena Research Manager, noted that the city has witnessed an exponential growth in the last decade becoming the first regional shopping destination with an exceptional retail offering. “The city boasts around three million square meters of retail gross leasable area while another million is anticipated entering the market over the next three years. Among other global hubs, Dubai retail sales performance lies on a midpoint in terms of sales per capita (around $4,000 in 2014).”
Matt Dadd, head of Commercial Leasing at Knight Frank Middle East, pointed out that Dubai continued to offer additional new retail brands to the market. “These are both international and locally grown concepts, which help Dubai cement its number one position in the region. With major retail centres at full occupancy or expanding their footprint, this is allowing additional brands to enter the highly competitive market. ”
The report added that “looking forward, Dubai South’s improving connectivity will be pivotal in establishing it as an important commercial hub in the UAE. The freezone is in a strong position to appeal to firms looking for international reach: a four hour plane ride from Dubai allows access to a third of the world’s population and an eight hour flight to two thirds. This wave of mega infrastructure projects should guarantee Dubai’s reputation as a global centre over the next decade, with Dubai South as a cornerstone.”