The demand for office space in Dubai is higher than the available supply, resulting in a trend of pre-leasing

Dubai’s Office Space Demand Surpasses Supply: Grade A Shortage Looms.Dubai, a thriving metropolis in the heart of the UAE, is facing an unprecedented challenge in its commercial real estate sector. The demand for office space is soaring to unprecedented heights, while the available supply struggles to keep pace. Analysts warn that the emirate could face a shortage of Grade A office space as early as next year, posing significant hurdles for businesses seeking premium locations in this dynamic city.

Meeting the Rising Demand: Upgrades and Expansions

The surge in demand for office space can be attributed to the influx of foreign companies choosing Dubai as their regional headquarters. With its strategic location, business-friendly environment, and robust infrastructure, Dubai has become a magnet for multinational corporations looking to establish a presence in the Middle East. Consequently, landlords and free zones are racing to upgrade older office spaces to meet the escalating demand and capitalize on the opportunity to command higher rents.

Prathyusha Gurrapu, a respected figure in real estate research and consultancy, sheds light on the current scenario. She reveals that developers and free zones are gearing up for the next phase of office projects. However, relief is not on the horizon until at least 2026, given the substantial construction timelines involved. Moreover, the majority of upcoming Grade A supply is already pre-leased, further exacerbating the supply shortage.

Rising Occupancy Levels: A Tightening Market

As demand continues to outstrip supply, occupancy levels in Grade A office spaces are projected to climb steadily. Gurrapu predicts that by the end of 2024, Grade A office occupancy rates could reach nearly 95%, inching closer to full occupancy by 2025. This trend is remarkable, especially when compared to global markets where office occupancy levels are considerably lower. Furthermore, the ripple effect of high demand is expected to extend to Grade B and Grade C spaces, pushing citywide occupancy levels to unprecedented heights.

Behnam Bargh, a seasoned expert in real estate management, highlights a significant trend within the office segment: a 15% surge in secondary sales prices. This uptick underscores the growing demand and appreciation of value within Dubai’s office market. Factors such as economic stability, infrastructure development, and favorable regulatory frameworks are fueling this surge, making Dubai an attractive destination for investors and businesses alike.

Market Dynamics: Insights from Industry Leaders

According to Betterhomes, a leading real estate agency, the average sale price in the secondary office market has witnessed a notable increase. From Dh927 per square foot last year, the average sale price has climbed to Dh1,062 per square foot. Although prices have surpassed the levels recorded in Q1 2019, they remain below the peaks seen in previous years, indicating a market in flux.

Prathyusha Gurrapu provides further insights into the supply dynamics. Notably, no new office supplies were delivered in the first quarter of the current year. However, projections indicate a potential influx of over 1.85 million square feet of gross leasable area in 2024, encompassing key developments such as Expo City Dubai, Wasl Tower, Millennium Downtown, and various phases of Innovation Hub and Dubai CommerCity. Additionally, major landlords and free zones are embarking on ambitious projects to address the rising demand, signaling a proactive approach to tackling the supply crunch.

Anticipating Future Trends: Navigating Challenges Ahead

Looking ahead, Dubai’s office market is poised for further evolution and growth. With demand showing no signs of abating, stakeholders must adapt to the changing landscape and explore innovative solutions to meet the needs of businesses and investors. From strategic expansions to infrastructural enhancements, the key lies in embracing agility and foresight to unlock the full potential of Dubai’s dynamic commercial real estate sector.

In conclusion, while Dubai’s ascent as a global business hub is undeniable, the shortage of Grade A office space presents a pressing challenge. By leveraging insights from industry experts and adopting a proactive stance, stakeholders can navigate these challenges and pave the way for a vibrant and resilient future. Contact us

Join The Discussion

Compare listings