A recent survey claims that the UAE’s commercial real estate market saw the most occupier demand in ten years in the second quarter due to the nation’s economy’s ongoing expansion.
According to the most recent data released on Thursday by the Royal Institute of Chartered Surveyors (Rics), occupier demand in the Emirates increased to 58 percent during the April–June period. This is the highest figure since the second quarter of 2014 when it was reported to be 64 percent.
Demand for real estate was strongest in the office category, then in the retail and industrial sectors.
Abdullah Akaish, senior public affairs officer at Rics, stated, “This robust demand is supported by strong rental and capital value expectations, particularly in Dubai, where population growth drives demand.”
Demand for commercial real estate is also being positively impacted by the lack of supply in the market as developers concentrate on creating new residential developments.
The imbalance between supply and demand for office space, in Mr. Akaish’s opinion, is driving up rental expectations and bolstering the market’s optimistic view.
The UAE’s robust demand for real estate is a result of rising oil prices as well as the expansion of the non-oil sector.
The banking regulator stated in June that the UAE’s GDP grew by 3.6% last year as opposed to the 3.1% predicted by the Central Bank of the UAE for the fourth quarter.
It is anticipated to increase by 6.2% in the next year and by 3.9% in 2024.
According to CBRE research earlier this year, the office category had 10,475 rental contracts filed in Abu Dhabi in the first quarter, representing an annual gain of 9.1%, while the number in Dubai reached 46,850, up 35.8% from the same period the previous year.
Dubai’s commercial real estate market is experiencing “remarkable expansion,” according to Gary Stevenson, commercial manager at Haus & Haus real estate, as demand rises “on the back of population growth with a growing number of companies moving to take advantage of Dubai’s strategic advantages.”
He told The National that the city’s standing as a major hub for international trade and business, as well as its robust infrastructure, business-friendly atmosphere, and alluring tax laws, all contribute to its continued appeal to businesses.
Companies looking to establish operations continue to show a great deal of interest in Dubai’s major business areas, such as Downtown, Business Bay, Dubai International Financial Centre, and Jumeirah Lakes Towers.
These places offer a dynamic atmosphere that fosters innovation and business growth, making them the most sought-after as well as the most active. Dubai’s allure has been further increased, he added, by the government’s ongoing infrastructural investments and progressive economic policies.
Returning to the workspace
Since workers have been going back to work full-time since the coronavirus outbreak, Dubai, Abu Dhabi, and Riyadh have nearly run out of premium office space, according to Faisal Durrani, founder and partner of Middle East research at Knight Frank.
“In certain cases, the best buildings in these cities—especially in Dubai—have long waiting lists, so they are 100% occupied. These cities are operating with occupancy levels for Grade A offices exceeding 98%.”
In the next four years, Dubai is slated to get more than four million square feet of office space, the majority of which has “actually been pre-leased,” according to him.
Aldar Properties revealed plans on Wednesday to build a Grade A office tower with a net leasable space of 88,000 square meters on Sheikh Zayed Road. The business estimates that the development will be finished by 2027.
In response to the market’s intense demand, it also secured a deal to purchase “6 Falak,” a completely occupied Grade A office building in Dubai Internet City.
Businesses are investing in space as it is being developed because they know that doing so now will have an impact on their long-term business strategy later on. According to Mr. Durrani.The consequences of the new HQ rule in Saudi Arabia Paula Walshe, director of transactional services at Savills Middle East, states that there has been no decrease or withdrawal of foreign companies’ office space in Dubai as a result of Saudi Arabia’s new regional headquarters regulation, which was enacted in January.
According to the regulation, businesses risk losing out on government contracts if they don’t have a local base in the kingdom.
However, businesses can function in the kingdom without a local headquarters as long as their abroad operations don’t cost more than one million Saudi riyals ($266,000).
Savills reported on Wednesday that during the first quarter of 2024, over 120 international companies moved their regional headquarters to Riyadh, a 477 percent rise from the same period as per the previous year.
Savills reported that in the second quarter, around 70% of its queries came from sources other than Saudi Arabia, notably from US and UK firms.
Dubai, according to Ms. Walshe, “remains a key office base for most corporate companies.”
Strong demand for commercial real estate is anticipated in the future due to attempts to diversify the economy and increase population.
“Maintaining market stability and promoting additional investment will require strategic planning to balance residential and commercial developments,” Mr. Akaish stated.
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