Dubai and Abu Dhabi Office Markets Record High Demand
- Business Companies Real Estate Regional
Global Business Magazine- 5 minutes read
The office markets in the UAE’s two main Emirates – Abu Dhabi and Dubai – recorded strong levels of demand in 2024, according to a latest report from the UK-based global real estate services company Jones Lang LaSalle (JLL).
In the report entitled “Middle East and Africa Market Review and Outlook 2025,” the company said whilst the majority of this demand in Abu Dhabi stemmed from government-related entities, there has been material growth in demand from the private sector, across a range of sectors and industries.
Overall, the capital recorded 47,615 office rental registrations in 2024, an increase of 30.8% y-o-y, the report said.
Due to the strength of demand and lacklustre new stock, which totalled only 31,315 sq. m. in 2024, a significant contraction in vacancy rates was recorded across market segments. As at Q4 of 2024, the average Prime, Grade A and Grade B vacancy rates stood at 1.7%, 1.5% and 4.5%, down from 8%, 3.6% and 7.1% a year earlier respectively. The city-wide vacancy rate for Abu Dhabi sits at 2.6% as of Q4 2024, down from 6.4% a year earlier.
“With demand expected to remain steadfast and new supply expected to be limited at 172,940 sq. m., the growth in rental rates is expected to likely continue to strengthen in 2025. This will particularly be the case in Prime and Grade A stock in core and central locations of the city,” the report noted.
Dubai
Coming to Dubai, the report said that steady levels of commercial activity stemming from new market entrants across existing and emerging sectors have supported the office market throughout 2024.
Dubai market has remained firmly landlord – favoured, where landlords are continuing to maintain an upper hand in lease negotiations. Due to the current supply and demand imbalance, something that will not change in the immediate future, landlords are being more cautious when signing non-indexed tenancies that are longer than five years.
Additionally, due to heightened demand, tenants were having to expedite deals with landlords in order not to lose out on favourable lease terms and available space. This has put pressure on international corporates, who have had to adjust their processes and approval timelines.
In Q4 of 2024, office lease rates increased by 10.6% and 12.9% y-o-y for Prime and Grade A office spaces, reaching $938 per sq. m. and $641 per sq. m. respectively. Subsequently, vacancy rates within prime developments averaged 0.2% as of Q4 of 2024, while overall city vacancy dropped down to 7.4%.
“As a result of limited availability of quality space, the market has seen an uptick in trading of dated commercial assets. Investors and developers have recognised an opportunity to refurbish and redevelop these properties to command a higher rental premium,” the report noted.
In terms of supply, around 122,000 sq. m. of new office space is expected to come online in 2025, the majority of which is of Grade A specification, spread across areas such as DIFC, Dubai Internet City, Dubai Silicon Oasis, and Sheikh Zayed Road.
The timely delivery of these developments will provide some relief for occupiers and begin to help balance the gap between supply and demand within the market. That said, the market is poised to maintain its momentum, with rental growth rates in 2025 likely matching those observed in the previous year, the report added.
