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Demand for office space in Dubai rose by 23% in the first half (H1) of 2023, with a severe shortage of supply lifting rents in prime locations.
The emirate’s office space market experienced an unprecedented spike, with demand reaching 580,000 square feet in H1 2023, global real estate consultancy Knight Frank said in a report.
While DIFC emerged as the most expensive location, the shortage of prime real estate also saw demand rise over the last 12 months for Business Bay, the Trade Center District, and Dubai Marina, which saw corresponding rent increases of 69%, 54%, and 54%, respectively.
Despite the growth, average office lease rates in Business Bay hovered at AED 176 psf, making it approximately 22% more affordable compared to Downtown Dubai (AED 225 psf).
Rents in the Trade Centre District and Dubai Marina stood at an average of AED 193 psf and AED 200 psf, respectively.
Transaction volumes
The investment market also experienced significant growth during the first six months of this year, with a 35% increase in transaction volumes compared to the same period last year, amounting to 2.2 billion dirhams.
Business Bay and Jumeirah Lake Towers emerged as key contributors to office sales, with notable transactions including the AED 22.5 million sale of 4,187 square foot and the AED 19 million sale of 6,559 square feet in Business Bay driving the average transacted price up by 18% to AED 1,060 psf.
“Dubai’s office market continues to experience a severe shortage of supply, with just three million square feet of space due to be completed between now and 2026, the vast majority of which is already spoken for. This is against a backdrop of 580,000 square feet of requirements,” said Faisal Durrani, Partner – Head of Middle East Research.
The market trend of occupiers is gravitating towards new Grade A developments, with older, more secondary office stock facing challenges in returning to pre-Covid lease rates due to a lack of demand.
(Writing by Bindu Rai, edited by Seban Scaria)
