Well managed, preferably single owned Grade A office properties in prime locations should continue to perform well for institutional investors, according to the latest research from Core, UAE associate of Savills.
The Dubai Investment Outlook H1 2016 report reveals this is in spite of apprehensions of a slower growing global economic background, because of strong existing and underlying demand from international corporate occupiers.
Grade A office yields in Dubai have remained constant since the start of 2016 at around 6% – the highest among other leading cities throughout the world.
CEO David Godchaux, says: “Institutional investors continue to prefer premium Grade-A buildings with a secure income stream under contract from blue chip international tenants in Downtown and DIFC.”
The report found Downtown, due to the controlled higher level of sales prices in comparison to lower rentals, has lower gross yield levels. While Business Bay is witnessing oversupply and muted demand keeping its yields almost constant to last year.
Jumeirah Lake Towers has seen a sharp drop in prices and a subdued drop in rents due to the availability of predominantly Grade-B stock, although the area is witnessing continued rental demand from SME and commodity occupiers who may not wish to lock in capital given the current market.
Mr Godchaux says: “Grade-B stock, especially in Strata owned properties in prime locations, may face absorption issues due to lower build quality, oversupply concerns along with longer transaction timelines, undercutting the tenant demand and locational advantages resulting in lower returns.”