Demand for office spaces in Dubai is exceeding supply, with the possibility of running out of Grade A office space next year. Many foreign companies are establishing regional headquarters in Dubai, leading to landlords and free zones upgrading older office stocks to meet the growing demand and capitalize on higher rents. Prathyusha Gurrapu, from Cushman & Wakefield Core, stated that developers and free zones are expected to initiate the next phase of office projects, but relief is not expected until 2026 due to construction timelines.
Gurrapu mentioned that most upcoming Grade A supply is likely to be pre-leased, resulting in a shortage of substantial new supply in the foreseeable future. She expects Grade A office occupancy to reach near full capacity by 2025, with occupancy levels of Grade A, B, and C stock expected to breach 90-92% over the next year. Behnam Bargh, from CRC, highlighted a significant trend in the 15% increase in secondary sales prices within the office segment, indicating heightened demand and value appreciation in the sector.
The average sale price of the secondary office market in Dubai stood at Dh1,062 per square foot, showing an increase from the previous year. The lack of new supply in the first quarter of the year has led to forecasts of over 1.85 million square feet of gross leasable area to be handed over in 2024, including projects like Expo City Dubai and Millennium Downtown. Major landlords and free zones are activating projects to address the growing demand, with developments expected in areas like DIFC, DMCC, and Tecom.
In conclusion, Dubai is experiencing a shortage in Grade A office spaces due to high demand from foreign companies establishing headquarters in the region. Landlords and free zones are upgrading older office stocks to meet the demand and benefit from higher rents. With limited new supply expected in the near future, occupancy levels are projected to be near full capacity by 2025. The secondary sales prices in the office segment have increased, indicating heightened demand and value appreciation. Major developments are set to address the growing demand for office spaces in Dubai, with projects like Expo City Dubai and Millennium Downtown expected to contribute to the available supply.
