Dubai’s strong, continuing economic growth, favourable tax regime and internationally respected legal and regulatory framework have all collided to make the city a global hotspot for business.
Add in initiatives like the recently announced Dubai Economic Agenda (D33), which aims to double the size of Dubai's economy over the next decade and consolidate its position among the world’s top three cities in which to do business, and it’s no surprise that office space across the emirate now comes at a premium.
Dubai government figures suggest a 4.6% year-on-year GDP increase to AED307.5 billion in the first nine months of 2022, underlined by a growth in business across all sectors.
Last year, Dubai witnessed significant growth in commercial real estate sales transactions. In 2022, Dubai’s office occupancy rates stood at 88%, up from 79% in 2021.
According to various reports, demand increased in all sectors, including retail, offices and warehouses. Commercial sales transactions increased by 32%. The value of commercial properties sold increased by 64% compared to 2021, a clear sign of a post-pandemic economic bounce back.
A company’s office location is, of course, dependent on which company licence it holds. A free zone company must take an office within that free zone, for example, while mainland companies can take space anywhere within the emirate. Simply put, if a company is registered with DIFC, for example, the offices need to be within that free zone.
Grade A office space – those work environments considered to be the best, in terms of quality, fixtures and facilities, and, of course location – remains scarce in Dubai, so commands premium sale and rental values. In the city, Grade A sites include Business Bay, City Walk and DIFC.
Global realtor Knight Frank reports that Businesses Bay (35%), Dubai Hills (25%) and Dubai Design District (D3) (23%) experienced the highest growth in office rental rates in the last 12 months.
DIFC rents averagely rose by 1.1% quarter on quarter, autumn 2022 office space reports, while prime buildings in the financial district are achieving rental premiums of around 40-50% more than DIFC-managed stock. Knight Frank suggests this is underpinned by occupiers’ wishes to secure best-in-class work environments – while also conforming to nascent environmental awareness mandates set by their global headquarters.
The need for superior office space perhaps also underlines the post-pandemic shift to more relaxed working hours, working from home and a growing expectation that companies will adhere more to staff wellness and ESG (environmental, social and governance) guidelines. Top staff expect top working conditions, and as we see a spike in the number of European entities coming to Dubai, or opening representative offices, they are seeking flagship premises.
ESG means companies now prefer to move into new buildings that already meet certain environmental and energy usage criteria – such as LEED, WELL or WiredScore accreditations.
And of course, Dubai’s aim to continue attracting significant global companies needs to be backed by a regular supply of world-class office space – hence the increased attraction of DIFC which is not only an uber-modern work environment, but offers all the advantages of a tax-free free zone, with 100% foreign ownership and an internationally compliant regulatory and legal framework.
Despite rising demand, the new supply pipeline is limited. Knight Frank forecasts some 2.9 million sq ft of new office space will be delivered by the end of 2025, with District 2020 and Uptown Tower T2 accounting for the bulk of this new space. District 2020 (the former Expo 2020 site) in Dubai South is the city’s largest single commercial office space development, expected to be completed later this year. We can certainly expect Grade A office space within District 2020, which has environmental concerns and work/life balance at its heart and promises cutting edge technology and world-class infrastructure.
While office space is limited in the most favoured districts – which witnessed the highest price hikes both for purchase and rent, there are still reasonably-priced office space in a number of submarkets, if you are willing to forego the advantages offered by modern, central and stylish locations. While rents for the highest quality offices will continue to experience upward pressure, rents in most submarkets are averagely 20% below their 2016 peak, Knight Frank’s analysts suggest.
Meanwhile, Dubai is now playing host to the region’s largest number of High-Net-Worth Individuals. During the first half of 2022, Dubai witnessed an 18% rise in the number of high-net-worth individuals living in the city, up to 67,900 people. If this growth rate continues, Dubai will be counted among the world’s 20 wealthiest cities by 2030.
This audience of wealthy people are often entrepreneurs, and the sort of business people who demand the very best office space a city has to offer. Given that Dubai has the region’s highest rates of FDI, too, it seems clear that the higher-spec office space will continue to command premium prices and rental rates.
Dubai’s business-forward statutes mean entrepreneurs can get easy access to a range of visas related to their work, as well as property and investment related visas.
Swiss Group is primed to help any business, investor or entrepreneur navigate the best area and office space for their needs.
Having had a presence in the UAE since the 1970s, the business advisory company offers the full gamut of services, from the best company set up, ensuring legal and tax compliance, and gaining the best visas for whatever the situation.
Last year – 2022 – saw a large influx of Europeans to Dubai, drawn by all the advantages the city has to offer. Swiss Group is on hand to advise this growing group on every aspect of corporate and private life in the UAE.
And in response to the growing influx of UHNWIs and HNWIs, Swiss Group recently opened a liaison office in Zurich, Switzerland for investors and companies from Switzerland and the DACH region who are interested in exploring the myriad opportunities the United Arab Emirates present.