Office rents in the UAE’s two largest business hubs have begun to recover to pre-COVID levels as demand for prime space intensifies, according to global real estate consultancy, Knight Frank.
According to Knight Frank’s analysis, five out of 27 locations in Dubai have seen office rents return to pre-pandemic rates, while in Abu Dhabi, the city’s best buildings continue to demonstrate rental resilience.
Still, Knight Frank points to the lack of new prime stock, which is sustaining upward pressure on rents in high quality buildings in some locations.
Leading the recovery in office rents is Business Bay, where average rents have climbed from AED 76 psf in Q1
The seemingly permanent attitude shift toward remote working has also given further impetus to the serviced office sector, which continues to expand, according to Knight Frank.
Away from the consolidation activity, serviced office providers are increasingly active in the market, offering enterprise solutions to businesses that are looking for greater lease flexibility and plug n’ play space, which is growing in popularity, as it has done in major global gateway cities.
In Abu Dhabi, office rents in all of the main submarkets tracked by Knight Frank have remained stable during Q1. On an annualised basis, the Corniche Area continues to pull away from the rest of the pack, with average rents climbing by 7.2% over the course of the last 12 months, taking them to AED 1,675 psm.
Knight Frank explains that the steady office demand is in part linked to the stable, but high office rents, which are now up to 14.5% higher than in 2020 (Corniche Area), or 2.5% in the case of both Al Reem Island and Capital Centre, which is to an extent supressing domestic demand from cost conscious occupiers, who are still assessing long-term occupational strategies, with a view to incorporating greater hybrid working.
Knight Frank has however registered examples of some businesses exploring alternative options, albeit the underlying driver appears to either be cost saving, or information gathering for renegotiating existing lease terms.
Also published on Medium.
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