The escalating demand and constrained supply have driven the average office lease rates in Dubai's prime submarkets up by 22.4 per cent in the first half of 2024. With Dubai Grade A office occupancy levels currently surpassing 90 per cent, there has been a notable surge in demand and a scarcity of supply across the city's top office submarkets, as reported by global property consultant Knight Frank. Developers are planning to introduce approximately 4.2 million square feet of new office space by 2028 to mitigate the shortage of office space, according to Knight Frank's Dubai Office Market Review report.
D&B Properties highlights that Dubai's office rental market has experienced a significant increase of 19 per cent in the second quarter of 2024, mirroring the city's dynamic economic activity and escalating demand for commercial spaces. "This substantial hike in office rents underscores the limited availability of commercial properties in the city, which has heightened competition for premium locations," the report stated.
Faisal Durrani, Partner and Head of Research, Mena at Knight Frank, noted that despite initial concerns that the pandemic would result in a permanent shift towards remote working, demand has actually surged, contrasting sharply with many other global cities. "Businesses are intensely focused on securing top-tier space, partly due to the established connection between occupying Grade A offices and the capability to attract and retain the best talent. Offices have evolved into showrooms," he said.
According to the Knight Frank report, the Dubai International Financial Centre (DIFC) remains the most costly area for office rentals in the city, with average rents hitting Dh355 per square foot. The Trade Centre District follows closely with rents at Dh350 per square foot, marking an impressive 81 per cent increase over the past year. Downtown Dubai ranks third but remains 1.5 times more affordable than the adjacent DIFC.
The Greens (77 per cent), Sheikh Zayed Road (West) (77 per cent), and Jumeirah Lakes Towers (67 per cent) have also seen double-digit growth rates in the last 12 months, with rents now exceeding Dh200 per square foot (psf).
Adam Wynne, Partner and Head of Commercial Agency, UAE, revealed that the consultancy's team has recorded 578,353 square feet of new office requirements during the first half of the year, emphasizing the sector's continued strength as the imbalance between supply and demand persists.
Wynne observed that the 'flight to quality' trend has become more pronounced in the market, coinciding with the emergence of ESG themes in occupier requirements. "Businesses are now prepared to pay a premium for high-quality office space in the UAE. Sustainability credentials are particularly important to international blue-chip occupiers."
Transaction volumes also reflect a thriving market. The total value of transactions in H1 2024 saw a 24 per cent year-on-year increase, reaching Dh2.7 billion, up from Dh2.2 billion in H1 2023. Furthermore, the number of sales transactions increased from 1,334 deals in H1 2023 to 1,414 in H1 2024.
Downtown Dubai continues to lead in office sales prices, with average values reaching Dh3,609 psf, marking a 132 per cent increase since 2020.
Adham Younis, GCEO of D&B Properties, stated that the 19 per cent rise in office rents in Q2 2024 reflects Dubai's robust business environment and the growing demand for prime commercial properties. "While the limited availability of office spaces poses challenges, the ongoing efforts to expand the market and offer innovative solutions will help meet the increasing demand and support the city's economic growth."
