Wednesday, 2 September 2015

Buying or renting commercial space in UAE?

Whether you choose to buy or rent commercial real estate in the UAE depends on your business objectives and funding options.

Last year, Dubai witnessed a spike in office rentals by almost 15% for premium commercial space. At the same time, secondary commercial space saw rentals rise by about 24% (Source: Cluttons Spring 2015 Dubai Commercial Property Outlook report). In the first quarter of 2015, however, rentals seem to have stabilised despite the high demand.

This is great news for both new and established businesses in the UAE. The country continues to attract new businesses every year, and these enterprises require office space. Though most business owners are more inclined to rent commercial real estate in the UAE than purchase it, the concept of owning one’s office space is also gaining ground.

The reasons for this are many, but chief among them is the fact that banks and financial institutions in the UAE are hugely supportive of business expansion plans for both residents and non-residents alike. Apart from a host of attractive office purchase loans at competitive interest rates, they are offering easy financing and repayment options to businesses. Several banks also offer loans that help businesses scale up their operations.

Should you buy or rent?

Renting commercial real estate in the UAE allows businesses the flexibility of moving locations if they dislike the premises, or scaling up main operations while working out of a cheaper back office. Though the rent money is one of the biggest overheads for the business, the office is insulated from rise in property prices during the lease period.

Another factor in favour or renting out office space is that the commercial real estate market functions differently from the residential one. The licensee of the space is expected to occupy the office for a longer time than his residential counterpart.

On the other hand, buying commercial real estate is beneficial for those looking to invest in property. If one does not have immediate need for it, one can rent it out and monetise the space. This helps pay off the bank loan EMIs as well. Additionally, since commercial space normally appreciates in value, the owner will make a profit when he sells the space later.

Additionally, one does not pay property tax or capital gains taxes on commercial real estate in Dubai and the UAE.

Even non-residents may purchase commercial office space

The UAE makes it easy for even non-residents to set up and operate businesses in the country. It is possible for expats and non-residents to purchase commercial real estate here, but only in areas designated for expat leasehold and freehold.

Banks and financial institutions extend loans to buy office space even to expats. Both private individuals and registered firms have the freedom to apply and secure commercial space loans in the UAE.