Premium Office Space Rentals Rise
RIYADH: As the Middle East region’s need for high-quality office space increases, Premium office space rentals rise in the UAE’s two largest commercial centres, Dubai and Abu Dhabi, are predicted to rise as occupiers push for a “flight to excellence,” according to global real estate firm Knight Frank.
Despite stable overall office space rentals in Dubai and Abu Dhabi, analysis from the firm shows that the demand for Grade A office space is still going up, and occupancy rates are high. Still, there are few new buildings being built.
Demand For New Office Spaces
The third quarter of this year saw a demand for 265,000 square feet of new office space in Dubai alone, according to Knight Frank data, which also shows that the city has seen 739,000 sq. feet of demand for new offices far this year.
If this trend persists, the property consultant anticipates Dubai will surpass the 1.1 million square feet of requirements it registered in 2021.
The Market’s Biggest Obstacle
According to Faisal Durrani, partner and head of Middle East Research at Knight Frank, the lack of quality Grade A space is the market’s biggest obstacle.
Square Feet To Be Finished By 2025
“Only 2.9 million square feet are expected to be finished between now and 2025, and Grade A occupancy levels are around 90% on average and even higher in some of the most popular buildings,” he said. “There are extremely few possibilities for occupiers wishing to enter or grow the market.”
The Majority of The City’s New Office Demand
According to research by Knight Frank, business services tenants accounted for 97,000 square feet of Dubai’s third-quarter space needs, which is the majority of the city’s new office demand. Barsha Heights (31,000 square feet), Business Bay (27,000 square feet), JLT (28,000 square feet), and Sheikh Zayed Road (22,000 sq. ft) are the main demand generators (22,000 sq. ft).
A Clear Tendency To Quality
A clear tendency to quality has developed. Occupiers are shifting from older buildings to more contemporary ones that are well-managed and maintained. Numerous foreign companies are also looking for space with ESG credentials, according to Andrew Love, partner at Knight Frank and head of Middle East Capital Markets and Occupier-Landlord Strategy and Solutions.
Only A Limited Amount Of New Supply
Despite an increase in demand, Knight Frank reported that there is only a limited amount of new supply, with just about 2.9 million sq. being supplied by the end of 2025. Uptown Tower T2 and District 2020 would account for most of the new space.
Due to the severe lack of new office space and the growing demand for high-quality workplaces, office space rentals in Dubai would likely continue to rise.
Rent Growth in Abu Dhabi
According to data by Knight Frank, Abu Dhabi’s Capital Centre has outperformed the rest of the city in terms of rent growth, with average office space rentals rising by 4.9% over the past 12 months to reach 1,400 dirhams ($381) per square metre.
Rent Growth in Saudi Arabia
There has been a rise in demand for quality office space in Riyadh, the capital of Saudi Arabia, where Grade A office occupancy rates increased by 4% yearly to reach 98%.
As a result of the rising demand, office space rentals rates would rise further.
According to Knight Frank, the average rent for premier office space in Riyadh has climbed by 18% over the last 12 months to SR1,775 ($472) per sq.
In the meantime, Jeddah’s office market is also seeing a “resurgence” in demand as domestic and international companies expand their presence in Saudi Arabia’s second-largest city.