Dubai prime office costs to occupiers in Q2 2022 up nearly 11% on a quarterly basis
Workers are continuing to return to offices around the world as Covid-restrictions ease, although there is significant geographic variation in office utilisation levels, according to global property consultants Savills.
The levels range from an average of 80% of workers back in the office in Dubai and over 90% in many Chinese cities, to less than 40% of workers in the office in the London City submarket and an average of 43% in North America.
Paula Walshe, Head of International Corporate Services, Savills Middle East said: “Pandemic restrictions in the UAE were lifted relatively quickly compared to other nations, helped by a widespread vaccination programme. Therefore, the shift towards hybrid and flexible working has been scattered among companies and has mostly been a result of international corporate occupiers putting in place global policies for staff.
“Compared to key office hubs around the world, Dubai offers relatively shorter commute times as office hubs are spread across the city and are easily accessible from key residential areas. Longer commute time is one of the key factors for the adoption of hybrid working in other cities.”
The findings are part of Savills Prime Office Costs Q2 2022 report which showed that inflation and supply chain issues are now feeding into office fit-out costs and keeping occupiers’ net effective costs high in many cities around the world. Savills tracks 29 world markets as part of this study.
Over the past year, fit-out costs have risen an average of 6% across the SPOC cities that have so far reported rises, says Savills, although proportionally they remain a small part of overall costs compared to rents. Several markets are seeing rising rents, especially for ESG-compliant spaces, as occupier demand continues to support the prime end of the market.
Locations including Asia Pacific cities such as Shanghai, Seoul and Ho Chi Minh, and key European cities including London, Madrid and Amsterdam, as well as Dubai in the Middle East also saw headline rent rises over Q2, says Savills, although these were often driven by index-linked lease structures.
Dubai prime office costs to occupiers stood at $104.14 per sq ft (psf) in Q2 2022 versus $93.86 psf in Q1 2022, up nearly 11% on a quarterly basis and the city takes the 12th spot. Hong Kong now sits at the top of Savills SPOC table, with the net effective cost to an occupier to take space in the city having surpassed that in London’s West End, while Tokyo has moved from third place at the end of Q1 to fifth in Q2, allowing Midtown New York and the City of London to move up one position each into third and fourth place, respectively.
Swapnil Pillai, Associate Director – Research, Savills Middle East said: “Many companies have reconfigured spaces to enable more collaboration and some others have upgraded to better-quality space to attract and retain talent and meet ESG considerations. Rents of prime and Grade A space therefore remain strong, driven by a steady increase in occupier demand amid limited Grade A stock and rising input costs for fit-out and construction.”
