The pandemic caused due to Coronavirus has raised the main focus on tech adoption, and also the sustainability and Environmental, Social and Corporate Governance(ESG), said by real estate consultancy JLL’s 2021 Insight Report on Property Trends for the Middle East. Dana Salbak, head of research at JLL Mena, says,“Going forward, these themes will define the shape of the real estate recovery in the Middle East.” In 2020, Dubai’s office market witnessed a total of 194,000 sq m of office GLA delivered, primarily in the DIFC and Downtown Dubai, raising the total stock to 8.9 million sq m. While, in Abu Dhabi, 40,600 sq m of office stock was added, summing up to a total supply of 3.8 million sq m. Both office markets continue to be tenant-friendly as the landlords continue to provide incentives and attractive lease terms.
In the office sector, in the short-term it will be all about “making do with what you have” of most of the corporates as cash saving remains a top priority, said Salbak.
Whereas, in the long-term “relaxing seating densities and collaborative spaces are likely to be a more permanent feature in a post-Covid-19 office environment. This will mean more meeting rooms, more video/VR space, and more space dedicated to health and wellbeing,” says Salbak.
In retail, with the increase of the digital channel, dynamics have another phase as well and there is an increase in the demand for more flexible leases from retailers. It also allows for rapid acquisition and witnesses innovative operators enter the market, she briefs. In terms of hospitality, the trend of co-working will reboot hotels as a one-stop-shop.
Big corporate acquirers will raise the demand for co-working space around people-centered areas, and virtual workers will use the touch-down points in hotels, mainly in Saudi Arabia and Egypt where long commutes are the norm.
“Hotels have been exploring co-working spaces as an alternative to their meeting and event space, and the focus has increased and it is expected to stay in 2021. This can help hotels significantly strengthen their branding and boost income,” concluded Salbak.
Facing headwinds
Robert Thomas, Head of Agency at Core says “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. Most new demand in 2020 stemmed from relocation activity, particularly from SMEs and regional occupiers as businesses adapted to market conditions. International corporates on the other hand are largely continuing to work from home with their real estate decisions deferred to the second quarter subject to the wider public being vaccinated. On the other hand, over Q4 last year, we saw an increase in leasing inquiries from large local or regional occupiers as they gradually phase back staff into physical offices.”
He also adds “With an offset impact, we saw a rise in inquiries from technology firms who witnessed a marked rise in business activity as COVID-19 disrupted occupier behaviors and increased their market penetration. Most technology tenants with healthy cash flows are looking to secure better commercial terms, longer lease terms, and early break clauses. Landlords are also willing to provide the same as longer-lease terms help in limiting vacancy levels.”
New trends in the office market
In 2021, the role of the physical office will remain important and also vital as the businesses will require common spaces to foster innovation, productivity, company culture, and teamwork that are difficult to maintain through remote working, says Thomas. “But as most new office demand is dominated by relocation or downsizing activity, maintaining occupancy levels and retaining tenants are the main focus for commercial landlords.” All around the world, technology, and allied sectors will be the new main landlords, superseding the banking, finance, and service sectors. This is also visible in Dubai, This year developers and landlords will also look at refurbishing office units or repurposing retail/mixed-use into office space to utilize asset classes with offices at City Walk, Roof Top in Nakheel Mall, and Golden Mile on Palm Jumeirah being prime examples.