Dubai office rents soar amid tight supply, strong demand

12/05/2025 03:11 AST

Dubai's office market is thriving, driven by strong demand, limited supply, and a surge in rental prices, positioning the emirate as a global hub for business and innovation.

According to Savills' latest Dubai Office Market report, average year-on-year rental price growth soared 45 per cent across various sub-segments in 2025, with key business districts like the Dubai International Financial Centre (DIFC), Business Bay, Downtown Dubai, and TECOM leading the charge.

DIFC, in particular, boasts an impressive occupancy rate of 98 per cent, underscoring the intense competition for premium office space. The city's Grade A office spaces are in high demand from both regional and international occupiers, fueled by Dubai's strategic appeal as a gateway to the Middle East, Africa, and Asia.

Savills reports a 4.9 per cent increase in net effective occupier costs in Q1 2025, encompassing base rent, fit-out expenses, and other leasing costs. This places Dubai as the eighth most expensive prime office market globally, with average costs of $148.90 per square foot per annum.

"This growth reflects confidence in Dubai's long-term positioning," said Toby Hall, head of Commercial at Savills. "Companies view Dubai not just as a regional base but as a global node for innovation, finance, and enterprise." Core sectors such as financial services, consulting, and technology and media are driving demand, accounting for the majority of market transactions.

However, the supply of quality office space remains critically low, with Cushman & Wakefield Core projecting an undersupply until 2027-2028. While new office supply is set to double in 2025, adding 1.66 million square feet, much of this is already pre-leased due to unrelenting demand. DIFC alone will contribute nearly one-third of the city's office supply over the next three years, with most spaces expected to be occupied before completion.

Dubai's office market holds the second-highest global occupancy rate at 92 per cent, projected to exceed 94 per cent by the end of 2025. In 2024, office rents surged by 22 per cent year-on-year, with forecasts predicting an additional 10-12 per cent increase in 2025. This growth is fuelled by an influx of new businesses and foreign companies drawn to Dubai's status as a trade, tourism, and financial hub.

A CBRE report highlights that the chronic undersupply of quality space in prime locations has intensified competition, pushing rental rates up by over 20 per cent annually and creating challenges for tenants during lease renewals.

Despite the tight market, landlords are adapting to meet evolving occupier needs. In established districts, where Grade A stock is scarce, property owners are offering tailored leasing terms, enhanced amenities, and refurbishments to attract tenants. In Business Bay, some strata landlords are now quoting rents comparable to DIFC, reflecting a broader uplift in perceived value across sub-markets.

Meanwhile, lease renewals remain a popular choice for businesses, particularly outside DIFC, where Rera rental protections provide stability in a rising cost environment. Occupiers are also prioritizing functional layouts and long-term adaptability over expansive or elaborate office designs, optimizing space usage to align with modern workplace trends.

While the outlook for Dubai's office market remains robust, with strong fundamentals and sustained occupier interest, the persistent undersupply poses challenges, as new deliveries in 2025 - approximately 100,000 square metres - are unlikely to alleviate pressure significantly. Most of these spaces will be pre-leased, leaving little room for new entrants or expanding businesses.

Khaleej Times