Ahead of the launch of the commercial rental index, many tenants in Dubai’s commercial property sector are relocating to more cost-effective areas, while others are renegotiating or renewing leases early to secure long-term agreements at current rates.
Industry experts note that landlords in prime locations are raising commercial rents in anticipation of the index’s introduction.
As previously reported, the Dubai Land Department (DLD) plans to introduce the commercial rental index in the first quarter of 2025.
This follows the recent launch of a smart rental index for residential properties by the DLD earlier this month.
Powered by AI technology, the smart rental index is based on a classification system that delivers accurate and fair property valuations for tenants.
Ben Bargh, Managing Director of Commercial Real Estate Consultants (CRC), a Betterhomes affiliate, highlighted key market trends ahead of the index’s launch.
“Landlords in prime locations are increasing rental prices to establish higher benchmarks before the index is implemented. Additionally, there is a noticeable shift toward premium, sustainable office spaces, with property owners upgrading their assets to attract high-value tenants. Furthermore, many tenants are opting for longer-term agreements to lock in current rates and protect against market fluctuations,” Bargh explained.
He further noted that some tenants are moving to more affordable locations, downsizing office spaces, or transitioning to co-working models to optimize costs.
“Others are renegotiating leases early, securing long-term contracts at existing rates, or requesting flexible payment terms to improve cash flow,” Bargh added.
Bargh also pointed out that landlords are focusing on modernizing properties to meet the rising demand for premium and sustainable office spaces, ensuring continued desirability in a more transparent and regulated market post-index launch.
“Moreover, many landlords are preemptively increasing rents, particularly in high-demand areas, to set higher base rates before the index introduces clearer benchmarks. This trend is especially evident in Grade A office spaces, where rents have already surged due to limited supply and strong demand,” he noted.
Dubai’s Booming Commercial Real Estate Market
Dubai’s commercial real estate market continues to expand, with 9,038 transactions recorded, marking a 24% year-on-year increase. The total transaction value also climbed to AED 90.1 billion, reflecting an 11% year-on-year growth.
The city is facing a significant shortage of premium office space, fueled by rapid business expansion and an influx of new company registrations.
“For years, occupancy rates in prime office locations have remained above 95%, resulting in substantial rental increases. Although more than 9 million square feet of office space is expected to be delivered by 2028 through major developments like Tecom’s Innovation Hub Phase 2, One Za’abeel Tower, DMCC’s Uptown Tower Phase 2, Al Wasl Tower, and DIFC 2.0, the current supply is still insufficient. This supply-demand imbalance is likely to persist in the near future, maintaining upward pressure on both rental and occupancy rates,” Bargh stated.
He emphasized that the most critical shortage in Dubai’s office market is within the Grade A segment.
“This reflects a rising demand for high-quality, premium office spaces from multinational corporations and regional firms expanding their footprint in the city. Occupancy levels for Grade A offices have reached record highs, with some reports indicating over 95% occupancy in key areas such as DIFC, Downtown Dubai, Business Bay, and Sheikh Zayed Road. Consequently, several off-plan commercial projects have emerged, primarily featuring Grade A offices, including The One by Prestige One, Capital One, and others,” Bargh concluded.
