Dubai’s office sector has remained resilient over the first half of 2022, aided mainly by the continued demand for Grade A office space which has also led to a sharp drop in vacancy levels for this segment, according to Savills Dubai Office H1 2022 - Market in Minutes report.
Occupier demand has been strong on the back of a buoyant local economy where companies are crystallising their expansion plans, and amid an influx of senior executives, business owners and High Net-worth Individuals (HNIs).
Dubai’s office utilisation levels in Q2 2022 were highest among Europe, Middle East and Africa cities tracked by Savills, with an average of 80% of workers back in the office in Dubai in some capacity, according to the recent Savills Prime Office Costs (SPOC) Report.
Paula Walshe, Director, International Corporate Services, Savills Middle East says, “Businesses are increasingly acknowledging the importance of upgrading their existing spaces or moving to new places altogether that better suit their renewed requirements, which were altered by the pandemic. Many of our clients are finding better value in consolidating their operations, which is allowing them to sharpen their focus while making significant savings against a backdrop of rising operational costs.”
Swapnil Pillai, Associate Director Research, Middle East says, “Amid a flight-to-quality, a general shift in occupier preference towards Grade A space continues, driven by an increased focus on ESG compliance and right-sizing of existing real estate footprint for cost and operational efficiency.”
He added, “Further diversification of the economy and the emergence of new sectors such as virtual assets are contributing to the expanding occupier profile.”
As a result of increased occupancy levels across prominent Grade A developments in Dubai, rental values have increased by an average 10% compared to H2 2021 and by approximately 13% y-o-y. According to the SPOC report, several markets are seeing rising rents, especially for ESG-compliant spaces, as occupier demand continues to support the prime end of the market. Dubai saw headline rent rises over Q2, Savills says.
The bulk of the leasing activity during the first six months of 2022 was observed across sub-markets such as DIFC, DWTC, DMCC, Dubai Media City and Dubai Internet City. In terms of rental performance across office locations, the highest year-on-year gains were witnessed at Dubai Investment Park (35%), followed by Barsha Heights (29%), Dubai Production City (27%) and Deira (25%). Meanwhile, the conjoined locations of Dubai Internet City, Dubai Media City, and Dubai Knowledge Village, and others such as Dubai Healthcare City and Dubai Design District largely remained stable.
In a prominent trend, demand for flexible space options such as serviced office and co-working spaces has grown as a result of companies looking to reduce their capex spending and due to new market entrants looking to set up operations in the city. As a result, most of the prominent flexible space operators across Dubai are recording high occupancy levels, with a few players reporting this at 100% and charting plans to further expand offerings in the emirate.