High Demand and Limited Supply Drive Market Growth.
Dubai, UAE– Despite facing various external economic pressures and significant events, Dubai’s office market continues to exhibit remarkable resilience and growth, reflecting a robust economic recovery and a high level of business confidence in the region’s economic prospects.
In Q2 2024, Dubai’s commercial real estate market experienced a slight decline in transaction volume, with a 2% decrease compared to the same period in the previous year. The number of commercial transactions stood at 2,915 in Q2 2024, down from 2,985 in Q2 2023. This marginal dip indicates the market’s overall stability, attributed to ongoing investments and strategic initiatives aimed at bolstering the commercial sector.
The total sales value saw a 6% year-over-year (YoY) decline, suggesting adjustments in property pricing or transactional volume within the commercial real estate sector. This decrease can be linked to significant events, including historic rains in April and two sets of week-long public holidays (Eid Al Fitr and Eid Al Adha), which traditionally reduce market activity.
The office segment in Dubai has demonstrated overall growth and resilience but at the same time suffered from a supply crunch over the last few years, specifically for Grade A office spaces. Transactions in the office market increased by 1% from Q2 2023 to Q2 2024, while the sales value surged by 17%. The total number of office transactions reached 764, amounting to AED 1.36 billion, noting the sustained demand for office spaces, despite the persistent supply crunch.
The supply constraint in the office market is particularly acute, creating a seller’s market. Landlords are leveraging this situation to impose stringent terms, such as demanding rent payments in a single cheque and refusing to include break clauses in leases. These conditions reflect the high bargaining power of landlords in the current market environment.
There is a massive demand for Grade A office buildings, especially those with LEED certifications, due to their sustainability credentials. Tenants are prioritizing these green buildings to enhance their corporate image and comply with regulatory requirements. Additionally, the emergence of pre-leases, where tenants secure office space before it becomes available, highlights the intense demand for high-quality office space and proactive tenant strategies.
One of the newest and most striking trends in Dubai’s office market is the emergence of pre-leases. This phenomenon, previously unheard of in the market, involves tenants securing office space before it even becomes available on the market. This signifies a shift in tenant behaviour, highlighting their willingness to commit to office spaces in advance to ensure they secure the best possible locations and facilities. This trend also underscores the limited availability of Grade A office spaces, pushing tenants to act swiftly and decisively.
Top 5 Locations for Office Transactions in Dubai:
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Business Bay: Dominates with 43% of all office transactions in Q2 2024, offering a mix of high-rise office buildings, luxury hotels, and residential units.
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Jumeirah Lakes Towers (JLT): Accounts for 32% of office transactions, favoured for its strategic location and free zone status.
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Dubai Silicon Oasis (DSO): Holds 5% of office transactions, known for its focus on tech-driven businesses.
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Arjan: Emerging with 4% of office transactions, located in Dubailand with a mix of residential, commercial, and hospitality developments.
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Jumeirah Village Circle (JVC): Also captures 4% of office transactions, attractive for SMEs due to lower rental costs.
The average selling price for secondary office spaces in Dubai has reached an all-time high of AED 1,364 per sq ft as of Q2 2024, representing a substantial 22% YoY increase. This surge underscores the strong demand and limited availability of high-quality office spaces, driving prices higher. Despite ongoing development projects, the persistent supply crunch for premium office spaces has led to increased competition among businesses, driving up prices and maintaining high occupancy rates.
