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Office shortages in Dubai, Abu Dhabi: Rents to go up

Knight Frank has estimated that Dubai needed an additional 265,000 square feet of office space

There is a reported shortage of new office space in Dubai and Abu Dhabi due to the broad return of people to their workplaces and growing corporate confidence.

In its most recent report, Knight Frank affirmed that occupancy levels in the two biggest commercial centres in the UAE are increasing. The rents too will continue to rise due to the demand and supply gap.

People wishing to lease space in the Grade A segment are increasing, and occupancy levels are currently between 90% and 95%.

Market in Dubai
Knight Frank has also estimated that Dubai needed an additional 265,000 square feet of office space.

With year-to-date demand at 739,000 square feet, the market is on course to surpass the 1.1 million square feet of requirements recorded in 2021.

The lack of quality Grade A space is the market’s most significant obstacle, according to Faisal Durrani, Partner and Head of Middle East Research at Knight Frank.

According to Andrew Love, Partner, Head of Occupier-Landlord Strategy and Solutions, and Head of Middle East Capital Markets, occupants are moving into more contemporary ones that are well-managed and maintained. Many foreign businesses are also seeking space with ESG credentials.

According to Faisal Durrani, office lease rates for the top buildings will keep rising. As a result, the disparity between rental performance in the long-established two-tiered office market is anticipated to widen; further, Faisal Durrani continued, adding that Grade B, or older, more secondary assets “will, however, likely continue to struggle.”

Market in Abu Dhabi
The average office rent in Abu Dhabi has already increased by 4.9% in the past 12 months. The emirate is also experiencing a shortage of Grade A office space, with occupancy rates at 95% in prime buildings like ADGM.

Businesses are optimistic, as evidenced by the non-oil sector PMI figures, and demand for office space is increasing everywhere. But, like Dubai, Abu Dhabi’s office sector needs more well-fitted, high-quality space in professionally managed buildings.

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