Dubai’s booming demand for office space is rapidly surpassing available supply, potentially leading to a shortage of Grade A office space by next year.

Increasing Foreign Company Presence

As more foreign companies establish regional headquarters in Dubai, landlords and free zones are upgrading older office spaces to meet the growing demand and capitalize on higher rents. Prathyusha Gurrapu, Director and Head of Research and Consultancy at Cushman & Wakefield Core, noted that while developers and free zones plan to launch new office projects, relief is not expected until 2026 due to construction timelines of two to three years.

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Pre-Leasing Dominates Market

Gurrapu explained, “With most upcoming Grade A supply likely to be pre-leased, we anticipate a continued supply shortage in the near future.” She expects Grade A office occupancy to reach nearly 95% by the end of 2024, nearing full occupancy by 2025, even as other global markets see lower occupancy levels. Demand is spreading to Grade B and C spaces, with citywide occupancy levels projected to exceed 90-92% over the next year.

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Secondary Market Growth

Behnam Bargh, Managing Director at CRC, highlighted a 15% increase in secondary sales prices, indicating rising demand and value appreciation in Dubai’s office market. This trend underscores the market’s appeal to investors and businesses, driven by factors such as economic stability, infrastructure development, and favorable regulatory conditions. Betterhomes reported that the average sale price in the secondary office market rose to AED 1,062 per square foot, up from AED 927 in the same period last year, and surpassing the Q1 2019 level of AED 933 per square foot.

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No New Supply in Q1

According to Gurrapu, no new office supply was delivered in the first quarter of this year. However, over 1.85 million square feet of gross leasable area is expected to be handed over in 2024, including phases of Expo City Dubai, Wasl Tower, Millennium Downtown, and the next phases of Innovation Hub and Dubai CommerCity.

New Developments and Upgrades

Major landlords and free zones are launching projects to meet rising demand. “Immersive Tower in DIFC is among the first of several developments within DIFC set to start construction, with DMCC and Tecom also launching their next phases,” Gurrapu stated. Additionally, many landlords are upgrading older office stocks to meet the increasing demand and benefit from higher rents. A small segment of secondary stock is anticipated to enter the market as some technology and services sector tenants consolidate, marginally easing the supply crunch.

Dubai’s office space market continues to thrive, driven by strong demand from international businesses and strategic developments by landlords and free zones, positioning it for sustained growth in the coming years.

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