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The ongoing pandemic has put a spanner in the works for Dubai’s office market. But, is the situation getting worse before it gets better? Perhaps, not, but what’s certain is that the office market is changing in response to the current situation.
New work arrangements and workplace strategies induced by the ongoing pandemic have created the need for changes in office absorption, supply, vacancy levels, and alterations in office spaces.
How has the office market changed?
Commenting on Dubai’s office market performance, head of agency at CORE, Robert Thomas, recently said: “The [office] market continues to face headwinds with occupancy levels and rents remaining under downward pressure as existing supply issues and limited first phase expansions impact office absorption.
“Overall vacancy levels across Grade A stock increased to over 22% as of Q4 2020 as most new stock brought to market over the last few years has been in this segment, while Grade B stock vacancy levels remained steady at 25%.”
Commenting on the property market, the head of Research at JLL MENA, Dana Salbak, said: “With the ease of lockdown measures and increased mobility during the quarter, there has been a considerable increase in the level of new leasing enquiries in the office sector.
Thomas continued: “Over Q4 2020, we saw an increase in leasing enquiries from large local or regional occupiers as they gradually phase back staff into physical offices.”
Changes in office space
As part of its annual report released in January 2021, CORE noted that most enquiry levels for offices are for plug and play offices.
Landlords could then respond in one of two ways. They could increasingly convert their shell and core assets to CAT A fit-out, that are fully functional and comprise a raised floor and ceiling, or completely furnish to facilitate absorption.
Developers and landlords are looking at refurbishing office units or repurposing mixed-use into office space to optimise asset classes with offices, CORE noted in its report.
JLL recently unveiled insights on the property trends expected to drive Middle East’s real estate sector in 2021.
The report stated that, for the short-term, office design will be about “making do with what you have”, placing top priority on cash preservation. However, in the long-term office adaptions are likely to drive demand for space.
“Relaxing seating densities, and collaborative spaces are likely to be a more permanent feature in a post-COVID office environment. This will mean more meeting rooms, more video/VR space, and more space dedicated to green space as well as health and wellbeing. Office design will need to factor this in and support the strategy around an all-round best-in-class employee experience,” said Salbak.
Is the office market’s loss the residential market’s gain?
Dubai’s real estate comprises of several sectors, all of which operate in tandem as cogs in the emirate’s strong wheel. When one pillar of real estate is then impacted, how does it affect the other?
In an exclusive column for Construction Week, Ali Sajwani, General Manager, DAMAC Properties observed: “We are already seeing a shift in real estate trends, with more of an emphasis being placed on residential projects and industrial warehouses, and less on the retail and commercial office segment.
As more people work from home, there is naturally less need for office space and people will be looking to upgrade their residences to accommodate a work space, perhaps.”
On his part, Julian Roche, Chief Economist, Cavendish Maxwell, wrote in a column for Construction Week: “Even before COVID-19, firms in the UAE were bringing pressure to relax office space requirements, in particular to extend exemptions to medium and even larger companies.
What is happening now? Several architect, consultancy and planning firms have made complex suggestions centred around attempts to maintain social distancing in the office environment. While some firms have taken this up, the overwhelming majority of firms have relied on work from home (WFH) and common sense to achieve the same objectives. WFH has not caused a fundamental reassessment of working practices: as soon as they can, employees are returning to their offices.”
Employees are potentially returning to office but is this return ‘as normal’? As per a research conducted by JLL, companies in the Middle East and around the world are questioning the purpose of the physical office space and are having to ‘reimagine’ the future of work to humanise office spaces.
Head of workplace design at JLL MENA, Yulliana Porter, said about the findings: “To attract and retain employees back to the office, workplaces will need to import some of the home comforts they’ve become used to during lockdown, creating a more human-centred environment. In the end, standardisation will give way to greater humanisation of space to support a liquid workforce.”
This article was originally published in Construction Week
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