Dubai: Small and medium sized businesses in Dubai continue to get hit with higher rent demands from their landlords – and many of them are even getting eviction notices as office spaces in the city keep recording peak demand and higher lease rates.
Many landlords are not in the mood for their current rents on offices to grow organically and thus extend their leasing arrangements with current tenants. This is where the evictions are starting to show up regularly, unless the tenant is willing to meet the 20%-30% increases on their rent costs.
Because, property market sources say, even a bare minimum office that’s available in Dubai will have ready takers. Plenty of them, to be precise.
This is why SMEs are having the most difficulty in meeting their landlords’ expectations of what the rent should be. Even if they wanted to move, there aren’t many immediately available choices to shift. Across top-tier and Grade A office buildings in Dubai, occupancy levels are well into the high 90% levels. It’s more or less the same situation when it comes to Grade B offices and locations.
This does put businesses that have received eviction orders in a tough spot. Whether it's in Deira, Bur Dubai, Karama, Garhoud or elsewhere, small businesses must make some tough decisions on what they should do about their offices and rents.
“We are seeing more eviction notices in the office space, but more for the smaller office spaces,” said Aakarshan Kathuria, CEO of RiseUp Properties. “These landlords tend to be individual investors who are inclined to send eviction notices as they might be looking to sell to cash out or prefer to use these offices for themselves.
“So far, landlords of bigger offices aren’t issuing such notices, as these properties are mostly owned by government entities, the big business groups in the UAE, or large companies.”
Office tenants must be notified
When it comes to evictions, business tenants have the rules and regulations to ensure they have ample time to make a decision.
If the landlord wishes to sell the property or use it personally, then a court-issued 12-month legal notice needs to be given.
Evictions can happen only when:
- On expiry of the term of the lease. The tenant must be notified by way of a notice sent through the notary public or by registered mail at least 12 months prior to the proposed date of eviction.
- This applies only when the landlord wishes to demolish the property or add new constructions - and provided that the landlord obtains the necessary licenses for such construction.
- The owner wishes to sell the property.
- The property requires renovation or heavy maintenance, which cannot be done while the tenant is occupying it. Here, a technical report needs to be issued or accredited by the Dubai Municipality.
- The owner wishes to use the property personally or by a next of kin (of first degree) provided there is no suitable alternative property for that purpose.
Make a case with Rental Disputes Centre
“In such circumstances, a landlord may not rent out the property for at least a further three years for office property,” said Porush Jhunjhunwala, CEO of Banke International Properties.
“The tenant may claim compensation from the landlord through the RDC (Rental Dispute Centre) under RERA for a breach of this provision, if the premises is leased out earlier.”
Dubai will have 'double the amount of new office supply' this year from a year ago, according to a recent report from Cushman & Wakefield Core. Much of it would be pre-leased.
Even then, the market will continue to be undersupplied until about 2027-28, it adds.
None of which would help the cause of businesses that need to find a new place urgently.
"Grade B office assets are more likely to experience higher percentage hikes compared to Grade A properties," said Prathyusha Gurrapu, Head of Research at Cushman & Wakefield Core.
"Grade B assets are often managed by relatively smaller, non-institutional operators who prioritize rental increases over factors like tenant covenants, lease length, and overall lease terms."
Office rents
SMEs occupying around 5,000-7,000 square foot offices in Bur Dubai and Deira would be paying around Dh500,000 per annum in rents. The rates could ‘go as low as Dh350,000 in some cases and as high as Dh650,000 depending on building quality and facilities’, says Aakarshan Kathuria.