As the developer of a freehold office building in Deira, selling out in two days was no surprise. The surprise was that we never anticipated that we could have created stronger demand had we positioned the building on the high-end spectrum. But back in 2014, Dh1,900 per square foot was a big ask.
We took a risk - a good risk - but we uncovered a big hidden truth too.
In the first-half of 2022, Dubai witnessed an unprecedented surge in business activity, with the Department of Economy and Tourism issuing 46,000 new licenses. This growth, following the issuance of over 72,000 licenses in 2021, underscores Dubai's position as an expanding hub for global businesses seeking to establish a foothold in the Gulf region.
The influx of new businesses has led to an increased demand for commercial space, particularly Grade A offices. Despite the interest, companies desiring to operate onshore face limited choices. Prime locations such as Dubai Marina and Downtown Dubai offer limited and prestigious options.
A supply shortage
It is imperative to note that there is good supply in the Business Bay area, not necessarily Grade A space. However, for infrastructure and traffic reasons, most of Grade A office-seekers keep looking to other areas too.
The big revelation is the demand for premium office space is set against a backdrop of a severe supply shortage. With only 3 million square feet of space anticipated to be completed by 2026, the market is under pressure. The scarcity in strategic mainland locations underscores the need for strategic planning and investment to meet the growing business community's needs.
Another significant insight is the fact that ICD Brookfield was an ultra-successful example. The same goes for Uptown Dubai Tower, leasing out the entire massive inventory in a matter of months. These examples operate within free zones.
The undisclosed reality is that the market in need of more such high-end properties within onshore business communities, and even within the older business districts like Deira or Bur Dubai. These areas represent a special opportunity for the local or GCC real estate developers. The opportunity is still up for grabs for the international freehold developers to build a high-end offices.
Even those parking bays are valuable
New trends are also filling this space, like extra parking bays for sale or rent. Thus, creating these extra podiums will pay for themselves and generate hefty premiums hands down. At one point, back in 2014, we were generating more sales from the extra parking bays we were ‘forced’ to build.
Not anticipating this influx of demand we faced, we actually started to package parking bays and the more sought after storage rooms to any less popular components in the building. And to our baffled eyes, these would still instantly.
Any shrewd developer would optimize his sellable area and have no wastage in GFA. However, we came to find out that any sharing spaces or communal areas have also seen immense value increases. To the point where developers are being super picky about their tenants and tenant mix.
With several global business wanting to grab a piece of the pie from the thriving economic growth of this region - and wanting to operate from Dubai - they are finding it rather difficult to find the sizeable office spaces they require within prestigious areas. If you are a developer and reading this, you know what to do…
