Dubai’s Office Rents Climb 22.4% In H1 2024
Average office lease rates in Dubai’s key submarkets have surged by 22.4% in the past year, according to the latest Dubai Office Market Review report for H1 by global property consultant Knight Frank. This growth is driven by rising demand and limited supply across the city’s top office submarkets with Dubai Grade A office occupancy levels currently exceeding 90%.
Faisal Durrani, Partner – Head of Research, MENA, commented: “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.
“And with just 1.2 million square feet of office space completing between 2021 and 2023, the market has found itself starved of prime space. And the shortage is set to persist, with just 4.2 million square feet due between now and 2028, most of which is already spoken for.”
CURRENT DEMAND
Knight Frank points to continued rising levels of demand from a variety of business industries, despite the shortage of space, which is underpinning the sharp rise in rents.
Adam Wynne, Partner – Head of Commercial Agency, UAE, explained: “Our 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.
“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.
“City wide occupancies sit in excess of 85% for Grade-B assets and in excess of 90% for Grade-A as occupiers keenly await new developments to enter the market. Businesses are having to carefully consider their growth plans in the wake of limited options and this in turn is fuelling pre-lease commitments on buildings yet to be completed, more customary in more mature markets”.
RENTS TRENDING UPWARD
The Dubai International Financial Centre (DIFC) continues to lead as the most expensive area for office rentals in the city, with average rents reaching AED 355 per square foot. The Trade Centre District follows closely in second place with rents at AED 350 per square foot, marking an impressive 81% increase over the past 12 months. Downtown Dubai ranks third, but remains 1.5 times cheaper than the neighbouring DIFC, according to Knight Frank’s analysis.
The Greens (77%), Sheikh Zayed Road (West) (77%), and Jumeirah Lakes Towers (67%) have also experienced double-digit growth rates in the last 12-months, with rents now exceeding AED 200 psf.
OFFICE SALES MARKET
Transaction volumes also indicate a thriving market, Knight Frank says. The total value of transactions in H1 2024 recorded a 24% year-on-year increase, reaching AED 2.7bn, up from AED 2.2bn 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 AED 3,609 psf, marking a 132% increase on 2020.
Capital growth remains robust in other areas too, with Barsha Heights and Business Bay growing by 47% and 35% respectively.
