Dubai office rents see 80-100% spike, Business Bay unit gets Dh1m

Dubai: An office in Business Bay has just signed a one-year rental deal for just over Dh1 million – after leasing at Dh550,000 just 12 months ago. The deal, struck with a new tenant for space of just over 6,350 square feet, is yet another sign of the significant spike in rentals for office property in Dubai.

Any landlord with vacant office premises or one that’s soon to be completed has ‘gold and Bitcoin on his hands’, according to a leading estate agent specialising in Grade A office leasing.

For businesses that occupy all these offices, a much higher rental cost is something they will need to factor in, whether that’s on an existing lease or a completely new one. This is also part of a reset of the office leasing market after the Dubai Land Department introduced a ‘star rating’ system for residential rentals and said one for commercial property was in the works.

Where possible, existing office tenants are trying to renegotiate new rental terms before their landlords come up with 'drastic revisions', say leasing agents.

Some business tenants are also considering the possibility of acquiring any freehold offices that are there in the market. In the coming days, the market expects a few major deals to pan out in Dubai's office real estate.

The Business Bay office that just got rented for Dh1 million plus was in the market for just 30 days, despite the 80% increase in rental from the previous lease. “Only a handful of office buildings in Business Bay would command a rental of Dh1 million and above, and those are super high quality with top-notch finishing and furnishing,” said  Aakarshan Kathuria, CEO of RiseUp Properties, which advised on the deal.

“The typical Dh1 million plus rentals for non-Grade A offices are mostly for longer durations, say 3 years or more. With this deal, we got the office owner a rental at Dh155 per square foot compared to building’s average of Dh120 psf. And that too for a one-year period, not multi-year.

“Overall, offices in Dubai are seeing a rental increase of 15%-20%, but that is the average within the segment of 750 square feet to 1,500 square feet offices.

“Offices offering above 5,000 square feet are seeing the most significant hikes due to the shortage of such large spaces being readily available in the market just now.”

According to Prashant Kamath, Managing Director of Solas Marine Group, which owns the office space in Business Bay that got rented for Dh1 million+, “Dubai’s commercial property market is experiencing a steady increase in value, driven by strong economic growth, government initiatives, and a dynamic business environment. This makes Dubai an attractive destination for investors - and businesses seeking to capitalize.”

As some office landlords sign on new leases at significantly higher rates, the pressure on others in the same building or area is piling up. These landlords too will waste no time in jacking up rates at the first opportunity.

“It will take a good 12 months before the Dubai office rental market settles down, and any new leasing that sets a new high will force others to follow suit,” said a leasing agent. “Everyone will want to do so before the Dubai Land Department announces a real-time digital Rental Index based on a star rating for offices.”