Dubai: Tech firms, including startups, are leading the recovery in demand for office space in Dubai, as more business hubs in the city see rentals returns to pre-Covid levels. Since the start of the year, landlords of some of the Grade A office buildings have been talking about renewed demand, including from entities that are launching their operations in the UAE.
The latest office property market report from Knight Frank says five of the 27 locations in Dubai have seen leases at 2019 levels, while in Abu Dhabi, prime office space continues to show ‘rental resilience’. In Dubai, Business Bay is leading the way on office rentals and demand, while DIFC holds sway at the top-end. Emerging areas like City Walk also received a profile boost with the food delivery portal talabat planning to build a HQ there.
At Business Bay, average rents have firmed up from Dh76 per square foot to Dh101 in these last 12 months.
Helping landlords is the fact that there is still limited supply of new quality office space in Dubai. “The resultant impact of this market dichotomy is upward pressure on rents, or at worst, stability in lease rates for the city’s best buildings,” said Andrew Love, Head of Middle East Capital Markets and Occupier Services & Commercial Agency, Knight Frank. “Some of the older, more secondary stock is starting to experience a migration of businesses to better quality buildings.
“What this means is that some sought-after submarkets with high concentrations of prime office buildings are unable to satisfy demand.”
A number of businesses are "still reassessing their occupational strategies, many of whom are shrinking their office footprints as a result of the rise in hybrid working models, which appear to be gaining a sense of permanency, particularly amongst international blue-chip and professional services businesses, as well as a handful of international banks,” said Faisal Durrani, Partner - Head of Middle East Research at Knight Frank.
Corniche corners AD market
According to Knight Frank, the Abu Dhabi Corniche’s super-prime buildings managed to ‘pull away from the pack’ with average rents up 7.2 per cent in these 12 months to a quite substantial Dh1,675 per square metre. Rents there are now 14.5 per cent higher than in 2020.
Elsewhere in the city, office rents remained stable - “This stability in large part stems from the continuing world-leading and decisive response of the UAE government to the pandemic,” said Faisal Durrani, Partner – Head of Middle East Research.
Al Reem Island and Capital Centre are the other two locations to have seen rent gains, of 2.5 per cent from 2020. International tenants are who is driving office dynamics in the emirate and “to an extent supressing domestic demand from cost-conscious occupiers, who are still assessing long-term occupational strategies, with a view to incorporating greater hybrid working,” the report adds.