Office Rents In Dubai Rising Faster Than London and New York’s Indicate Market Recovery
The Dubai office market is rebounding for the first time in six years, Bloomberg reports and is growing faster than in New York and London. In order to expand into the new global financial hub, global corporations and banks are looking toward real estate in Dubai.
928.5 feet (283 meters) high above the financial district, ICD Brookfield Place, demonstrates the rush for office spaces in the emirate. Bloomberg reported that 90 percent of its 1.1 million square feet are already occupied or in contract, and there is a long waiting list for the rest.
The building is occupied by UBS Group AG, Israeli fintech company Rapyd, and Pernod Ricard SA, which relocated its Hong Kong staff to ICD Brookfield Place.
In response to the pandemic and relatively easy access to visas, demand for space in the skyscraper and across Dubai’s commercial real estate market is surging. In 2014, an oil-induced property slump in Dubai severely affected the emirate’s commercial and rental property sector. However, the emirate’s commercial sector has recently begun to rebound and rental prices in Dubai for office spaces have surged.
A seven percent increase in prime office rents and 7.2 percent in grade A rents were recorded in the first six months of the year through June. The American real estate company CBRE reports that lower-grade workspace increased by 3 percent.
A CBRE report indicates that prime rents increased 1.4 percent in London and 3 percent or less in New York.
Bloomberg said that Dubai, unlike New York and London, managed to attract employees back to work after the global pandemic. In Dubai, people generally drive and most live within a 30-minute drive of their workplaces, so commuting is more tolerable.
Brands are recalibrating and resizing their physical store strategies as a means of diversifying their portfolio and expanding their footprint across cities, with “experience” becoming more and more important as a mechanism for bridging the retailer-consumer gap.
Compared to a year ago, Dubai project completions in H1 2022 increased by more than 500 percent. As retailers experiment with innovative methods to attract consumers and drive sales online and offline, we expect these positive sentiments to last in the near term.
UAE stands out despite similar efforts by New York and London to lure employees back to their desks as the influenza pandemic has ushered in a fierce debate about future demand for office rental market space worldwide.
One real estate company reported that 80% of workers in the emirate are back at work, compared with just 40% in London City. At the end of June, the US had its highest office utilization rate since the pandemic began at almost 43%.
Office space is also in demand outside of the financial district. Almost half of the office space in Uptown Tower, located in the Dubai Multi Commodities Centre, has been preleased even before it is built. In addition to crypto and blockchain businesses, traders of Russian commodities have been flocking to the free zone and government authority for commodities trading in Dubai’s real estate sector.
Vaneesh Sachdeva, Chief Executive Officer at Houzon, a leading real estate company in Dubai, predicts that rental rates in Dubai won’t slow down with limited supply and companies trying to lure workers back with more attractive office spaces in Dubai. The first half of the project is expected to be completed by this year, and the second half will be completed by 2023, he said.
Despite the limited supply of new office space in Dubai, Sachdeva predicts that more refurbished and repurposed offices will become available in the near future in the Dubai real estate market.