In Dubai, office rents face continued upward pressure due to high occupancy rates and strong demand. Despite recent office project launches, the market is expected to remain undersupplied in the near term.
SUPPLY: AS DEMAND CONTINUES TO OUTPACE SUPPLY, THE MARKET IS EXPECTED TO REMAIN UNDER-SUPPLIED FOR THE NEAR TERM
Dubai's total office inventory currently stands at 108.66 million sq. ft. as of YTD 2024. Key deliveries this year include 6 Falak, A2 CommerCity, and Millennium Downtown. Demand continues to rise, increasing rents and occupancy rates, with the city projected to remain under-supplied for the next two years. Looking ahead, upcoming free zone developments include Immersive Tower in DIFC and D3 Phase 2. There is limited new supply in the onshore licensed office market, with Aldar's mixed-use project on Sheikh Zayed Road being the latest launch. Due to robust demand, many under-construction projects are expected to experience pre-leasing activity.
DEMAND: RECORD HIGH OCCUPANCY LEVELS ACROSS THE CITY WITH GRADE A STOCK LEADING THE WAY City-wide occupancy rates remain robust, with Grade A office spaces achieving the highest occupancy at 94%. Grade B and C offices follow closely at around 88%, with an overall city-wide occupancy rate of 91%. Sheikh Zayed Road (Trade Center Area 1) and Dubai CommerCity(current phase) have experienced the highest increases in occupancy, reaching 98%, followed by Downtown Dubai at 97%, and both Dubai Design District and DIFC at 95%.
PRICING: UPWARD PRESSURE ON RENTS CONTINUES IN THE WAKE OF HIGH OCCUPANCY LEVELS AND ROBUST DEMAND City-wide average office rental rates have reached AED 165 per sq. ft., reflecting a 19% increase year-on-year. The DIFC tops the list with the highest average rental price per square foot, followed closely by One Central and Downtown Dubai. Low vacancy rates have strengthened landlord confidence, contributing to continued rental price hikes and creating a premium for the limited available space.
