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Dubai United Arab Emirates
The occupier market in Dubai and Abu Dhabi saw strong activity in the first quarter, driven by increased demand from new rental registrations.
In Dubai, occupier activity remained strong during the first quarter. According to data from the Dubai Land Department, the total number of rental registrations reached 46,850, representing a 35.8% increase over the previous year. “This headline growth has been largely underpinned by a 51.1 percent increase in new rental registrations, which totaled 34,461. Renewed contracts registered a total of 12,389, marking a 6.1 percent growth from the previous year,” CBRE Middle East said in its UAE Office Market Review for the first quarter of 2024.
In comparison to other global markets, the current dynamics of Dubai’s occupier market continue to draw global corporations. Despite a lack of supply, free zone locations continue to account for a significant portion of market activity. To meet rising demand, developers are accelerating future developments in both free zone and non-free zone locations, according to a commercial real estate services firm.
“Demand in Dubai’s occupier market continues to stem from a broad range of sectors, with the financial services sector, namely hedge funds and assets management firms, being notable sectors of demand,” it said.
In Abu Dhabi, approximately 10,475 rental contracts were registered, representing a 9.1% year-on-year increase. This growth was primarily driven by a 21.2% increase in new rental registrations, while the number of renewed contracts fell by 5.1%.
“The primary source of occupational demand in Abu Dhabi continues to originate from entities with direct and indirect government links, particularly in on-shore locations. That being said, the limited availability of quality stock remains one of the main challenges being faced. Given this, several entities have started considering build-to-suit options, particularly within core CBD locations, to accommodate their future expansion plans,” CBRE said.
According to Taimur Khan, head of Research Mena in Dubai, robust levels of demand persisted in the UAE’s occupier market in the first quarter of the year, owing primarily to the country’s strong economic growth, which continues to attract occupiers.
“Despite that occupier demand is expected to remain resolute over the upcoming period, the dearth of availability of quality assets will likely hinder potential market activity. In terms of performance, the limited number of developments in the pipeline in both Abu Dhabi and Dubai is expected to continue to underpin strong performance across all segments,” said Khan.
“Looking ahead, we expect that high-quality assets, particularly Prime and Grade A stock, will continue to outperform the market due to the growing levels of demand resulting from the ongoing flight-to-quality trend and the limited availability of supply,” he said.
In Dubai, the average occupancy rate within this market segment increased to 91.3 percent in Q1 2024, up from 90.1 percent the previous year. “This increase in occupancy levels, combined with a scarcity of high-quality inventory, is driving rental rate increases. In the first quarter of 2024, average Prime, Grade A, Grade B, and Grade C rents increased by 7.6%, 17.9%, 21.6%, and 16.8%, respectively.
As of the first quarter of 2024, the average Prime Grade A, Grade B, and Grade C rental rates were Dh255, Dh192, Dh162, and Dh131 per square foot per year. Given the limited number of upcoming developments and the scarcity of quality stock, we anticipate continued strong performance in Dubai’s occupier market.
The average occupancy rate of Abu Dhabi’s institutional-grade buildings reached 94% in the first quarter of 2024, up from 92.5% the previous year. “These increased occupancy levels continue to support growth in rental rates. In the year to Q1 2024, average Prime, Grade A, and Grade B rents registered average growth rates of 6.6 percent, 3.4 percent, and 9.7 percent, respectively,” CBRE said.
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