Dubai office rents start to stabilise thanks to economic momentum and creation of jobs

Office rents in Dubai began to stabilise during the second quarter of this year with the technology, media and telecoms, or TMT, sector driving demand, according to a new report from property consultancy Knight Frank.

The move comes as the UAE economy recovers from the effects of the coronavirus pandemic. Fourteen of the 26 submarkets tracked by the consultancy registered no quarterly change, while rents rose in areas such as Business Bay, Downtown Jebel Ali, Dubai Hills, Dubai Media City and The Greens.

“As is the case with other global cities, the TMT sector is underpinning office requirements as the market thaws following an extended period of pandemic-induced stasis and it is the TMT sector where we are seeing the fastest rate of job creation,” the report said.

However, overall office rents remain at nine-year lows, leaving occupiers firmly in the driving seat.

The new requirements for office space during the second quarter rose by 11.2 per cent to 18,859.3 square metres, from 16,954.8 sq metres in the previous quarter.

Downtown Jebel Ali office rents increased by 8.3 per cent on the previous quarter to Dh65 ($17.69) per sq foot, while Business Bay rents rose by 4.4 per cent to Dh78 per sq ft. Rents in The Greens were up 6.1 per cent to Dh88 per sq ft. On an annual basis, rents in the Business Bay and The Greens districts increased by 4 and 6 per cent, respectively.

The TMT and transport and storage sectors are expected to add about 100,000 new jobs to the UAE economy over the next five years, driving demand for office space.

“Of the 203,000 sq ft of new requirements registered during the second quarter, the technology, media and telecoms sector accounts for the lion’s share [22.1 per cent], followed by design and architecture companies [19.2 per cent] and the hospitality sector [9.9 per cent],” the report said.

Most TMT requirements are concentrated around the emirate’s city centre in areas such as the Dubai International Financial Centre, Downtown Dubai, Sheikh Zayed Road and Business Bay districts, according to Knight Frank.

The 100 per cent company foreign ownership law that came into effect on June 1 will “undoubtedly have a significant impact in the medium to long term for demand for office space in key markets”, the report said.