Dubai's office market is expected to witness rental growth for the first time in five years in 2013, but much of the existing vacant stock will remain empty as it is deemed unsuitable to occupiers' needs.
"We believe there will be a recovery in rents in certain parts of the Dubai market. Having said that, we are cautioning people against getting too carried away," said Jones Lang LaSalle's head of research for the MENA region, Craig Plumb.
"Growth will only be in selected properties - in single-ownership buildings offering large floorplates in established locations."
Jones Lang LaSalle's latest office report on the Dubai market showed that rents remained flat in 2012 at around $435 per m2 in the central business district (CBD) and around $395 per m2 city-wide. However, vacancy rates remain high - at 31% in the CBD and as high as 60-70% in other parts of the city such as Business Bay.
Moreover, a further 550,000m2 of office space is set to be completed and be placed on the market in 2013.
JLL's MENA region CEO Alan Robertson said that the ownership model of some of the space makes it unappealing for corporate occupiers.
"A lot of the space will be strata-owned, where you might not just have one owner per floor, You might have 8-10 owners per floor. If a company needs five floors, it does not make sense for them to have multiple landlords. It would be an administrative nightmare for them."
He points to the example of Standard Chartered which, despite being able to choose from a slew of empty buildings within the central business district, commissioned a developer to build its new headquarters in Downtown Dubai through signing a pre-lease deal.
"Two of our corporate clients at the moment have very large requirements and we think that there's a good chance that they may end up speaking to developers to do pre-lease deals to get buildings that exactly meet their requirements.
"Larger requirements tend to have more time to plan their move - 2-3 years ahead of lease expiries. It gives them time to take advantage of a pre-lease deal and end up with a bespoke product."
When asked what will happen to the significant levels of vacant space, he said that a lot would find tenants and/or buyers in the long run.
"Space will be taken up by smaller occupiers, owner-occupiers and tenants. Some may be converted into business centres and some may be converted into residential units."
In its latest report, CBRE's UAE head of research Mat Green said that new supply was greater than demand in 2012, which "resulted in further inflation of vacancy rates across the majority of the emirate's major business districts.
"The highest vacancies are found within locations most impacted by strata title spaces, such as Business Bay and Dubai Silicon Oasis. Sole ownership assets within these areas are currently commanding far loftier rents, whilst also benefiting from superior occupancy rates, highlighting the emergence of a two-tier marketplace.
He said that the office sector was "likely to remain under stress during 2013, due to continued supply and demand imbalances caused by the excessive delivery of strata title stock".
"Of the roughly 600,000m2 of new inventory to be completed during 2013, we estimate that close to 60% will be held on a multiple-ownership basis."