Demand for office spaces in Dubai is surpassing supply, and the emirate may face a shortage of Grade A office spaces as soon as next year.
Driven by an influx of foreign companies establishing regional headquarters, landlords and free zones are refurbishing older office buildings to accommodate the increasing demand and take advantage of rising rents.
Prathyusha Gurrapu, director and head of research and consultancy at Cushman & Wakefield Core, noted that developers and free zones are planning to start new office projects, but no significant relief is expected until 2026 due to construction taking at least two to three years.
"As the upcoming Grade A supply is likely to be pre-leased, we anticipate a continued shortage of substantial new supply in the market for the foreseeable future,"
she added.
Gurrapu also mentioned that with office demand continuing to exceed supply and most new spaces being pre-leased, occupancy levels are expected to rise. She forecasts that Grade A office occupancy will reach near 95% by the end of 2024 and will be almost full by 2025, contrasting sharply with much lower occupancy levels in other global markets. Furthermore, she expects city-wide occupancy levels for Grade A, B, and C office spaces to exceed 90 to 92 percent over the next year as demand spills over into Grade B and C spaces.
Behnam Bargh, managing director at CRC, highlighted a significant trend in the office sector—a 15% increase in the secondary sales price, which reflects rising demand and value appreciation. This surge in secondary sales prices emphasizes the allure of Dubai's office market for investors and businesses, driven by factors such as economic stability, infrastructure development, and favorable regulatory frameworks. Betterhomes reports that the average sale price in the secondary office market is now AED 1,062 per square foot, up from AED 927 last year, surpassing the Q1 2019 level of AED 933 per square foot, although it remains below the prices of previous years.
No new supply in Q1
Prathyusha Gurrapu revealed that no new office supply was delivered in the first quarter of this year.
"We expect over 1.85 million square feet of gross leasable area to be handed over in 2024, including upcoming phases of Expo City Dubai, Wasl Tower, Millennium Downtown, and further developments in Innovation Hub and Dubai CommerCity,"
she stated. Additionally, she noted that many major landlords and free zones are now initiating projects to meet the increasing demand.
"Immersive Tower in DIFC will be the first among several developments within DIFC expected to start construction, along with the next phases of DMCC and Tecom. We're also seeing a growing number of landlords upgrading older office stock to cater to rising demand and leverage higher rents. A small portion of secondary stock is anticipated to enter the market as some tenants in the technology and services sectors consolidate, which may slightly ease the supply crunch,"
she added.
News Source: Khaleej Times
