Commercial rents in Abu Dhabi and Dubai have started to come back to pre-COVID-19 levels as the demand for premium space increases.
As per the global real estate consultancy Knight Frank’s analysis released on Monday, 18 April, 5 of 27 locations in Dubai have witnessed office rents returning to pre-covid prices. While in Abu Dhabi, the best buildings are still showing rental stability.
The partner and head of Middle East research at Knight Frank, Faisal Durrani, “Despite the quieter ending to 2021, early data from Q1 suggests a rebound in demand in Dubai, due to technology businesses extending their footprints, albeit many are start-ups.”
“To an extent, the growth by this group of occupiers is being deteriorated by several businesses that are still reassessing their occupational plans, many of whom are shrinking their office footprints as a result of the growth in hybrid working models, which appear to be acquiring a sense of permanency, especially amongst international blue-chip and professional services businesses, and a handful of international banks,” he further added.
But, Knight franks still points towards a lack of new prime stock, maintaining upward pressure on rents in good buildings in some areas.
“There is a minimal supply pipeline of high-quality office stock in Dubai, where the concentration of businesses remains centred. The effect of this market paradox is upward pressure on rents, or at worst, stability in lease rates among the city’s best buildings, while some of the older, the more secondary stock is beginning to undergo a migration of businesses to better quality buildings,” explained Andrew Love, head of Middle East Capital Markets and Knight Frank, Occupier Services & Commercial Agency.
Business Bay is leading the comeback in office rents, where average rents have risen from Dh76 per square foot in Q1 2020 to Dh101 psf (per square foot).
Whereas in Abu Dhabi, office rents in all of the main submarkets tracked by Knight Frank have stayed stable during Q1. Every year, the Corniche Area resumes pulling away from the rest of the pack, with moderate rents climbing by 7.2% over the last 12 months, taking them to Dh1,675 psm.