Office rents in Dubai will soar up to 40%

The feared slump in Dubai's residential property market is unlikely to occur while office rents will skyrocket by up to 40 per cent over the next two years, according to a real estate advisory and marketing company.In the residential market, the talk of the city continues to be an anticipated price correction, triggered by a massive supply of new units.According to Dubai-based RichVille Advisory Group, construction delays and a population expected to double in five years means these fears are unfounded.The city's population will hit 2.5 million by 2010, creating demand for an additional 480,000 residential units (based on 2.5 people per unit), the study claims.It adds that expected projects scheduled for completion by 2010 do not exceed 500,000 "residential" units - the rest being office and mixed use developments.
Most property analysts have hinted at a slight softening in the residential sector, the office market continues to experience minimal vacancy rates, resulting in skyrocketing prices.Dubai's office market is currently offering one of the highest returns worldwide, while prices are considerably below international average. The current return on offices exceeds 20 per cent, and it is expected to increase over the coming two years.
The current office space available is approximately 12 million square metres and is expected to increase to over 30 million square metres over the coming five years.Current occupancy rates are about 99 per cent and are expected to maintain their position for at least the next two years, say analysts. In the unlikely case that demand does not keep up with supply over the coming five years, occupancy rates will not go under 75 per cent, which is higher than market averages around the world. Furthermore, return on office rental income will likely continue to be higher than current rates and significantly above international averages. All these factors will likely keep office properties prices at the same level they are at today, with some minor difficulties in return, as supply and demand exchange the lead.