Dubai continues to defy a slump in the commercial real estate market that’s battered occupancy rates and rental yields around the world.
(Bloomberg) — Dubai continues to defy a slump in the commercial real estate market that’s battered occupancy rates and rental yields around the world.
“There’s strong demand for the central business district, which reveals that customers prefer high-quality offices in a prime location,” Abdulla Belhoul, chief executive officer of Tecom Group, told reporters on Wednesday after the company reported a 6% increase in revenue.
“We also continue to see strong interest from multinational companies looking to expand their footprint in Dubai and the region,” he said.
The company, whose tenants include Meta Platforms Inc. and Alphabet Inc., said second-quarter revenue rose to 535.1 million dirhams ($146 million). It added more than 1,500 new tenants in the first half of the year, and occupancy rates stood at 87%, according to a regulatory filing.
An influx of companies setting up in Dubai has bolstered the city’s commercial real estate market and helped end a multi-year property slump. Average occupancy rates rose to 92.7% from 84.8% in the second quarter “on the back of increased demand and limited availability of quality supply,” according to recent report by CBRE Group Inc.
Average rents for prime commercial real estate in the emirate have risen as much as 17%, according to CBRE, pushing average asking prices above 2019 levels. That compares with an average increase of 5% in London prime real estate and record vacancies in the US, where tech giants are dumping millions of square feet of office space.
In contrast, investors are looking to snap up assets in Dubai. An office tower in the heart of the city’s financial district has drawn interest from more than a dozen entities globally, Bloomberg reported on Wednesday.
Tecom operates several business districts in Dubai and its portfolio includes Dubai Media City, Dubai Internet City and Dubai Studio City. Its CEO Belhoul said while new projects are being built after years of limited construction activity, demand will continue to outpace the supply available on the market.
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