Rising demand for Grade A office space in Dubai is forcing businesses to expand into new commercial districts, including Expo City and Dubai Science Park, as occupancy levels in the city’s prime business hubs reach record highs, according to Knight Frank’s Dubai Office Market Review (pdf). With space running out, companies are also pre-leasing offices before they are even completed.

Occupancy levels hit record highs: Occupancy rates at the Dubai International Financial Center (DIFC) hit nearly 100%, while prime buildings on Sheikh Zayed Road are averaging 95.4% occupancy. Downtown Dubai and Business Bay are also near full capacity with occupancy levels ranging at 95-97%.

Office lease rates in Dubai’s major business districts jumped 24.3% year-on-year in 2H 2024. The Trade Centre District saw the biggest spike, with rents rising 96%. The Greens and Dubai South followed with an 83% increase, while Sheikh Zayed Road (West) recorded a 50.4% jump.

Companies are scrambling for space, with demand for 1.28 mn sq ft of office space recorded in 2024, up 64% y-o-y from 2023. The banking and finance, real estate, and business services sectors alone accounted for 843k sq ft of that demand.

Office sales transaction volumes jumped alongside leasing demand, with 1.6k transactions recorded in 2H 2024, a 10% increase compared to 1H. Transaction values also jumped, hitting AED 3.8 bn in 2H 2024, a 41% increase from 1H 2024 and a 38% spike compared to 2H 2023, according to the report.

Why is it happening? Dubai’s office boom is fueled by a wave of new businesses, multinational relocations, and local corporate expansions, Khaleej Times quotes head of research for Mena at Knight Frank Faisal Durrani as saying. The city’s zero corporate tax, pro-business policies, and lower real estate costs compared to global financial hubs have made it a magnet for companies.

In context: “Despite recent growth, office rents still trail the pre-global financial crisis. Indeed, prime rates in the DIFC are still about 50% below 2009 levels,” Durrani said.

Relief is on the way: Dubai is set to add 8.2 mn sq ft of office space by 2028, an 86% increase from the previous development cycle between 2021 and 2024. The bulk of new supply will come from major projects like DIFC Square, which will add 5.4 mn square feet, along with Tecom’s 650k sq ft and Aldar’s Sheikh Zayed Road development, which will contribute 88k sq ft. Even with this influx of new office space, rents are expected to stay elevated as demand continues to outpace supply, Durrani added.

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