The office market in Dubai has seen a notable increase in demand for top-quality office space in Q2 2023, keeping with previous quarters, as per the Dubai Office Market in Minutes Q2 2023 Report by Savills. Demand was especially evident from banking and financial services, and the technology, media, and telecommunications (TMT) sectors. The city has also attracted new companies, particularly from the US and Europe. Additionally, companies from Asia, particularly India, and China, are establishing a presence in Dubai.

The report also sheds light on the working habits that were formed in the post pandemic years and may prove to have a lasting effect than initially expected. In the US, 56% of full-time employees, roughly 70 million people, have said that they can do job their job remotely. Whilst 51% and 42% work remotely at for least one day a week in Germany and the UK, respectively.

Top-Tier Global Office Markets

This trend is however, far from being uniform on a global scale, as revealed in the Savills Future Office Availability Index – the study analyses top-tier global office markets to better understand the effects of the current macro trends, including  costs, availability, pipelines, hybrid working trends, and future office needs.

“When we compare the office dynamics in the Middle East, and more specifically Dubai, to the rest of the world, we see that it’s quite different. Dubai was one of the very few cities globally to that resumed business as usual after a relatively short period of lockdowns and the office market across the emirate has been on an expansionary trend ever since”, said Swapnil Pillai, Associate Director, Research at Savills Middle East said.

“Another thing that distinguished Dubai when compared with cities in North America and Europe was that the of prolonged utilisation of work-from-home options weren’t as widespread. Companies across the city focused more on hybrid-work models once the lockdown restrictions were lifted”, he added.

New companies establish presence

Paula Walshe, Director, Transactional Services explained: “Throughout the initial six months of 2023, there was a notable influx of new companies establishing their regional offices in Dubai, vividly underscoring the escalating need for office spaces within the city.” This surge in leasing activity was chiefly propelled by a wave of corporate entities from the United States and Europe, driving the transaction share to 72% in Q2 2023, up from 55% in Q1 2023. “Distinguished financial services firms like Alliance Bernstein, GoldenTree Asset Management, Verition from the US, and St. James’s Place from the UK inaugurated offices across Dubai during our review period. Concurrently, a gradual influx of companies from Asia, particularly India and China, contributed to this dynamic landscape,” she added.

Strategic Transition

Existing corporate occupants across the city are adopting a more strategic and extended outlook towards their current office space requirements. Several companies are re-evaluating their rightsizing endeavours, which initially gained traction due to the rise of hybrid work models at the start of the year, and flexible working arrangements adopted by many. However, a recent trend has emerged where companies are leaning towards retaining their current space or considering smaller reductions compared to their initial plans. This shift in approach is attributed to various factors, including the costs tied to relinquishing additional space, the limited availability of Grade A developments, and the constrained upcoming supply. Moreover, the anticipated economic growth and opportunities in the Middle East have prompted select multinational companies to adopt distinct regional office real estate strategies, setting them apart from their broader global strategy.

Micro-Market Focus

Leasing activities have been concentrated across all Grade A developments within the city. Specific micro-markets, such as the DIFC, have particularly thrived due to the issuance of exclusive trade licences by the freezone authority. The heightened demand has consequently spurred rent increases across most markets. Within DIFC, rental rates have witnessed a year-on-year increase of 15%, whilst One Central recorded gains of 27%, Business Bay nearly 39%, and JLT an average of 23%, compared to Q2 2022.

Global Ranking and Prime Office Value

This quarterly surge in rental values has propelled Dubai to the eighth spot in the global hierarchy of the most expensive prime office markets, as indicated by the latest Savills Prime Office Costs [SS1] report. With an average net effective cost of USD 120.72 per sq ft for prime office space, Dubai has outpaced cities such as Paris (USD 119.85.), Shanghai (USD 116.63), and Delhi (USD 112.22) per sq. ft.

To read the full report, click HERE