Rising demand and limited supply had propelled average office lease rates in Dubai’s key submarkets by 22.4 per cent in the first half of 2024.
With Dubai Grade A office occupancy levels currently exceeding 90 per cent, there has been a demand surge and limited supply across the city’s top office submarkets, according to global property consultant Knight Frank.
Developers plan to add approximately 4.2 million square feet of new office space by 2028 to address the short supply of office space, the property consultant said in its Dubai Office Market Review report.
According to of D&B Properties, Dubai’s office rental market has seen a notable increase of 19 per cent in the second quarter of 2024, reflecting the city’s vibrant economic activity and growing demand for commercial spaces. “This substantial rise in office rents highlights the limited availability of commercial properties in the city, which has intensified competition for prime locations,” the report said.
Faisal Durrani, partner – head of Research, Mena of Knight Frank, said despite concerns that the pandemic would lead to a permanent shift toward remote working, demand has in fact surged, which stands in sharp contrast to many other global cities. “Businesses remain laser-focussed on securing best-in-class space, not least because of the proven links between occupying Grade A offices and the ability to attract and retain the best talent. Offices have graduated to become showrooms,” he said.
According to the Knight Frank report, the Dubai International Financial Centre (DIFC) continues to lead as the most expensive area for office rentals in the city, with average rents reaching Dh355 per square foot. The Trade Centre District follows closely in second place with rents at Dh 350 per square foot, marking an impressive 81 per cent increase over the past 12 months. Downtown Dubai ranks third, but remains 1.5 times cheaper than the neighbouring DIFC.
The Greens (77 per cent), Sheikh Zayed Road (West) (77 per cent), and Jumeirah Lakes Towers (67 per cent) have also experienced double-digit growth rates in the last 12-months, with rents now exceeding Dh200 per square foot (psf).
Adam Wynne, partner – head of Commercial Agency, UAE, said the consultancy’s team has registered 578,353 square feet of new requirements for offices during the first half of the year, highlighting just how robust the sector continues to be as the imbalance between supply and demand continues.
Wynne noted that the ‘flight to quality’ trend has become more prevalent in the market as we witness the emergence of ESG themes in occupier requirements. “Businesses are now willing to pay a premium for good quality office space in the UAE. Sustainability credentials are especially important to international blue-chip occupiers.”
Transaction volumes also indicate a thriving market. The total value of transactions in H1 2024 recorded a 24 per cent year-on-year increase, reaching Dh 2.7 billion, up from Dh2.2 billion in H1 2023. Additionally, the number of sales transactions rose from 1,334 deals in H1 2023 to 1,414 in H1 2024.
Downtown Dubai continues to dominate office sales prices, with average values reaching Dh3,609 psf, marking a 132 per cent increase on 2020.
Adham Younis, GCEO of D&B Properties, said the 19 per cent rise in office rents in Q2 2024 reflects Dubai’s robust business environment and the increasing demand for prime commercial properties. “While the limited availability of office spaces presents challenges, the ongoing initiatives to expand the market and provide innovative solutions will help meet the growing demand and support the city’s economic growth.”