The office sector in Dubai’s real estate market is experiencing a significant uptick in pre-commitments for the first time as UAE has emerged as a preferred destination for corporates to expand their footprint in the region.
Industry executives say that Grade A office space in Dubai is operating at over 95 per cent occupancy level, with demand mainly coming from Indian, Chinese and European firms alongside existing corporations expanding their operations.
“Pre-committing space across under-construction projects has increased across most micro-markets. While it is quite common in more mature office markets globally, it has only recently been observed across the office landscape in Dubai, an indication of long-term corporate interest in the city,” Emirates NBD Research said in its latest study.
“The UAE has emerged as a preferred destination for corporate occupiers to expand their office footprint. As a gateway city to the region, the bulk of this occupier demand has been concentrated in Dubai. Along with other locations in the region such as Abu Dhabi and Riyadh, Dubai has defied the global slump in office activity seen over the past few years,” Dubai’s largest bank said.
Demand for office space has grown globally after the pandemic as economies bounced back, reaching pre-pandemic levels. But some markets in Asia have surpassed their pre-pandemic levels now.
95% occupancy of Grade A level offices
The study noted that demand has gradually picked up over the last few years, initially driven by consolidation and relocation activity of existing corporate occupiers from multiple smaller office spaces to one central location. However, the city’s relatively cost-effective Grade A offering and a rebound in economic and tourism activity, driven by prudent government policies has positioned Dubai as a viable alternative for global corporates looking at expanding their office footprint and future-proofing their real estate portfolio in a region which is primed for sustained economic growth.
“In the region, Dubai was at the forefront of a rebound in occupier demand after lock-down restrictions were lifted. This trend has persisted with most Grade A spaces across the city currently operating at 95 per cent or more occupancy levels. This is in sharp contrast to the pre-pandemic trends when demand levels were low and various lease incentives such as extended rent-free-periods, additional car parks and contribution towards fit-outs were offered by landlords,” Emirates NBD Research analysts said.
Demand for office space was observed from both existing corporate occupiers as well as from new firms entering the local market.
“Demand was observed from Indian corporates, companies from Europe and tech firms from China. There has also been a surge in demand from banking and financial services (BFSI) related firms, especially hedge funds that have significantly expanded in the region. The Dubai International Financial Center (DIFC) is the preferred free zone for BFSI companies. The micro-market recorded 1,451 new company registrations in 2023, growing by 34 per cent year-on-year. However, as occupancy levels in the micro-market are currently averaging at 95 per cent, there has been a spillover in demand to the Abu Dhabi Global Markets (ADGM). Across other micro-markets, activity levels remained strong across Dubai World Trade Central (DWTC), Dubai Internet City and Media City,” it said.
To meet the growing demand for offices, it is estimated that more than 1.2 million sqft of Grade A space will be added in Dubai in the coming few years.
Source: www.khaleejtimes.com
