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UAE commercial real estate: A new approach to office spaces

Article-UAE commercial real estate: A new approach to office spaces

office space
The UAE’s office sector will be driven by greater emphasis on improving collaboration, productivity and employee wellbeing

With work-from-home in full swing due to the current global pandemic, the UAE’s commercial real estate will be driven by greater emphasis on improving collaboration, productivity and employee wellbeing, according to JLL’s Q1 2020 UAE Real Estate Market Performance report.

According to the report, the commercial real estate (offices) in both Abu Dhabi and Dubai is in the late downturn stage of the cycle, as leasing activity remained sluggish in the first quarter of the year. However, in line with trends witnessed up until the end of 2019, corporate demand is expected to be active for fitted spaces with leases that offer tenants maximum flexibility.

“As expected, corporates in this current environment are focused on implementing business continuity measures and developing long-term operational resilience,” said Dana Salbak, Head of Research MENA at JLL.

“Most companies will look to modify the design and layout of commercial real estate spaces to address mid-term company strategies and employee needs. In the long-term, we expect demand to centre on commercial real estate space that offer more of a collaborative and social experience rather than just a place to work. There will also likely be widespread adoption of Health & Wellness Standards to ensure employee wellbeing.

“That said, in the coming months, market performance will heavily depend on the extent to which normal activity is resumed, as well as the government initiatives undertaken to promote the country’s property market,” she added.

The retail sector remained challenged by the growth of e-commerce, change in consumer preferences and a significant supply pipeline, particularly in Dubai. This continues to place downward pressure on rental rates across retail centres in the UAE. The drop in domestic and international consumer spending, on the back of temporary mall closures and travel restrictions, is expected to have a strong impact on both tourist and household spending. With the growth in online shopping, the short-to-mid term is likely to see more retailers adopt omnichannel retailing as a tool to mitigate costs. This is expected to boost demand and the overall performance of the logistics and warehousing sector, as requirements for these expand.

Meanwhile, Q1 2020 represented a ‘Tale of Two Halves’ for the hotel sector in the UAE. While year to YT February 2020 occupancy rates registered 81% and 77% in Dubai and Abu Dhabi, respectively, the impact of event cancellations and travel suspension was felt immediately after. Looking ahead, demand in the second half of the year will likely be driven by domestic tourists seeking ‘stay-cations’ as opposed to being internationally driven.

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