Dubai’s office market saw an increase of 20,000 square metres in office gross leasable area (GLA), bringing the total stock to approximately 9.26 million sq. m. The newly added stock consisted of Grade A quality offices, which was delivered in Umm Ramool. In the next two quarters, there is a pipeline of approximately 18,000 sq. m. of office GLA. In Abu Dhabi, the total stock remained largely stable at 3.95 million sq. m, with a limited delivery of 7,500 sq. m. However, in the second half of the year, an additional 125,000 sq. m. is scheduled for completion, the JLL report showed.

In Q2 2024, Dubai’s commercial real estate market experienced a slight decline in transaction volume, with a 2 per cent decrease compared to the same period in the previous year, a report by Betterhomes’ commercial real estate arm showed. The number of commercial transactions stood at 2,915 in Q2 2024, down from 2,985 in Q2 2023. This marginal dip indicates the market’s overall stability, attributed to ongoing investments and strategic initiatives aimed at bolstering the commercial sector.

The total sales value saw a 6 per cent year-over-year (YoY) decline, suggesting adjustments in property pricing or transactional volume within the commercial real estate sector. This decrease can be linked to significant events, including historic rains in April and two sets of week-long public holidays (Eid Al Fitr and Eid Al Adha), which traditionally reduce market activity.

The office segment in Dubai has demonstrated overall growth and resilience but at the same time suffered from a supply crunch over the last few years, specifically for Grade A office spaces. Transactions in the office market increased by 1 per cent from Q2 2023 to Q2 2024, while the sales value surged by 17 per cent. The total number of office transactions reached 764, amounting to Dh1.36 billion, noting the sustained demand for office spaces, despite the persistent supply crunch.

The average selling price for secondary office spaces in Dubai has reached an all-time high of Dh1,364 per sq ft as of Q2 2024, representing a substantial 22 per cent YoY increase. This surge underscores the strong demand and limited availability of high-quality office spaces, driving prices higher. Despite ongoing development projects, the persistent supply crunch for premium office spaces has led to increased competition among businesses, driving up prices and maintaining high occupancy rates.

Strong demand and increased leasing activity drove rents upward in both cities. In Dubai, average Grade A rents in the central business district (CBD) surged by 15 per cent year-on-year (y-o-y), reaching Dh2,630 per sq. m. per annum. The rush to secure prime office space further intensified pressure on CBD vacancy rates, leading to a drop to eight per cent in Q2. Similarly, in Abu Dhabi, average Grade A rents rose by 10 per cent compared to the previous year, reaching Dh2,085 per sq. m. per annum. Vacancy rates in Abu Dhabi also decreased to 21 per cent.

Original article reference: Khaleej Times.