Dubai’s real estate market has witnessed remarkable growth and transformation over the past few years, and the office sector is no exception. The surge in demand for office spaces in Dubai, driven by positive economic sentiment, ease of doing business, and various economic drivers, has resulted in soaring office rents and occupancy levels. In this blog post, we will explore the current state of Dubai’s office market, its growth trajectory, and the factors contributing to this upward trend.
Dubai’s Office Market: A Post-Pandemic Resurgence
The COVID-19 pandemic temporarily disrupted many aspects of the global economy, including the real estate sector. However, Dubai’s office market has shown remarkable resilience and recovery. The city is experiencing a significant surge in office rents and occupancy levels, with year-on-year increases of up to 24 percent since the pandemic.
As of now, the total office market size in Dubai stands at an impressive 107.6 million sqft, with city-wide office rents surpassing Dh138 per sqft/year. This growth represents a 32 percent increase in market size since 2014, and it has already surpassed the previous peak office rents recorded in 2014.
The Scarcity of Office Stock
One of the primary drivers of rising office rents and occupancy levels in Dubai is the scarcity of office stock in the near future. Demand is far outstripping supply, with prime/Grade A office occupancy levels at a record high of 92 percent, compared to just 75 percent pre-pandemic. In the last three years, over 11.5 million sqft of office space has been absorbed, with 9 million sqft absorbed in the last 18 months. In contrast, only 2 million sqft of stock is expected to be delivered in the next two years, and most of it is already pre-leased.
Prominent handovers, such as Uptown Tower by DMCC, have added substantial office space to the market. Still, the ongoing and upcoming projects, like One Zabeel, Innovation Hub One, and Dubai CommerCity’s next phases, are expected to further address the supply-demand imbalance by 2026.
Rising Rents and Occupancy Levels
The demand for office spaces in Dubai is not only strong but also diverse, coming from both new market entrants and existing occupiers looking to expand. Key sectors driving this demand include banking, finance, business services, and technology. The city’s strategic location, competitive office rents compared to other global cities, and ease of doing business have made it an attractive destination for companies to establish and grow their operations.
Rents in office districts across Dubai have seen year-on-year increases ranging from 5 to 50 percent. Grade A projects, both in free zones and onshore areas, have been particularly sought after. Sustainability mandates are driving occupiers toward new, efficiently managed, and green Grade A developments. While older stock is still in demand, it may face long-term challenges due to aging infrastructure, requiring significant investments for upgrades.
Serviced office space providers like WeWork, ServCorp, and Regus have also been experiencing high occupancy levels, reflecting the increasing demand for short-term plug-and-play offices, especially from new market entrants.
The Road Ahead
Dubai’s real estate market, particularly in the office sector, shows no signs of slowing down. With limited available office stock, rising demand from various sectors, and the scarcity of Grade A office space, Dubai office rents are expected to continue increasing. A further 10-20 percent rise in prime areas is anticipated, along with continued upward pressure on occupancy levels over the next 18-24 months.
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