Dubai Office Sector Expands by 20,000 Square Meters in Q2

According to two separate studies released on Tuesday, Dubai’s office market has demonstrated impressive resilience and growth in the second quarter of 2024. This trend reflects a strong economic recovery and heightened business confidence in the region.

JLL’s UAE Real Estate Market Overview for Q2 2024 highlights that Dubai's office sector is thriving due to a robust economy, diverse demand, and a focus on sustainable and high-quality spaces. In this period, the office gross leasable area (GLA) in Dubai increased by 20,000 square meters, raising the total stock to approximately 9.26 million square meters. This addition primarily consists of Grade A offices delivered to Umm Ramool. Looking ahead, about 18,000 square meters of office GLA are projected to be added in the next two quarters. In contrast, Abu Dhabi’s overall stock remained stable at 3.95 million square meters, with a minimal addition of 7,500 square meters. However, the JLL report forecasts an extra 125,000 square meters to be completed by year-end.

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Betterhomes’ commercial real estate division reports a slight 2% decrease in the number of commercial transactions in Dubai compared to the previous year, with 2,915 transactions in Q2 2024 versus 2,985 in Q2 2023. This modest decline indicates market stability, supported by ongoing investments and strategic measures to bolster the commercial sector. The total sales value also experienced a 6% year-over-year decline, attributed to factors like historic April rains and public holidays such as Eid Al Fitr and Eid Al Adha.

Despite a shortage of Grade A office space, Dubai’s office market has seen a 1% increase in transactions and a 17% rise in sales value from Q2 2023 to Q2 2024. The persistent demand for office space is evident from 764 transactions totaling Dh1.36 billion. The supply shortage has created a seller’s market, with landlords imposing stricter lease terms, including single-check rent payments and the exclusion of break clauses.

According to Betterhomes’ data, the top five locations for office transactions in Dubai are:

• Business Bay: Leading with 43% of office transactions, known for its high-rise office buildings and luxury developments.
• Jumeirah Lakes Towers (JLT): Accounting for 32% of transactions, valued for its strategic location and free zone status.
• Dubai Silicon Oasis (DSO): Representing 5% of transactions, popular among tech-driven businesses.
• Arjan: Emerging with 4% of transactions, located in Dubailand with diverse commercial and residential options.
• Jumeirah Village Circle (JVC): Also with 4% of transactions, favored by SMEs for its lower rental costs.

As of Q2 2024, the average price of secondary office space in Dubai reached an all-time high of Dh1,364 per square foot, marking a significant 22% year-over-year increase. This rise reflects the high demand and scarcity of premium office space, driving up prices and maintaining high occupancy rates.

In terms of rental rates, both Dubai and Abu Dhabi have seen increases. In Dubai's central business district (CBD), average Grade A rents rose by 15% year-over-year to Dh2,630 per square meter annually. This surge in demand for premium office space has contributed to a decrease in CBD vacancy rates, now at 8%. Abu Dhabi’s average Grade A rents increased by 10% to Dh2,085 per square meter annually, with vacancy rates dropping to 21%.

Faraz Ahmed, Research Director at JLL MENA, noted that several new commercial real estate projects have been launched in Dubai and Abu Dhabi in 2024 to address supply constraints and meet growing demand for high-quality, sustainable office spaces. With over 140,000 square meters planned for delivery by the end of the year, the UAE continues to strengthen its position as a global business hub.

In the retail sector, rising demand has led to increased rental rates. Average rents in Dubai’s primary and secondary malls climbed by 16% year-over-year, while Abu Dhabi saw an 11% increase. Despite no new completions reported, the retail stock in Dubai remains at 4.8 million square meters, with an additional 58,000 square meters expected in the second half of the year. Abu Dhabi’s retail stock stands at 3.15 million square meters, with 85,000 square meters projected.

The hotel sector has also shown strong performance during the typically slower summer months. Dubai experienced a 10% annual increase in foreign visitors and a 6% rise in revenue per available room (RevPAR), driven by a 5% increase in average daily rates (ADR). Abu Dhabi similarly saw significant growth, with ADR up by 13% and RevPAR rising by 24% year-over-year.

The UAE’s industrial market is also expanding, with a notable increase in warehouse rents in Dubai—up 14% year-over-year. New projects are underway in established free zones like Dubai Industrial City, JAFZA, and Dubai South. In Abu Dhabi, average warehouse rents rose by 10% year-over-year, driven by demand for high-quality warehousing spaces.

A new trend in Dubai’s office market is the rise of pre-leases, where tenants secure office space before it is officially available. This shift highlights the high demand for Grade A office space and underscores the competitive nature of the market.

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