Dubai Office Rents Surge 15%-20% as Landlords Act Fast
The Dubai office rental market has been witnessing dramatic changes, especially for tenants. Rent hikes of up to 20% are becoming increasingly common in key locations and buildings across the city, with landlords wasting no time in enforcing these increases. If tenants do not agree to these hikes, they are being served with eviction notices, leaving landlords with waiting lists of potential tenants eager to take over the space.
This surge in office rent increases is not limited to a specific type of property. Whether it’s a Grade A or Grade B office, tenants are seeing their rent go up during lease renewals. In most cases, landlords are pushing for the maximum allowable increase of 20%, as outlined by the Real Estate Regulatory Agency (RERA). Even if tenants agreed to a higher rent in the previous year’s renewal, landlords are still seeking to push rates even higher, taking full advantage of the current demand in the market.
Why Are Office Rent Increases Happening Now?
The reason for these drastic hikes is straightforward. While natural demand is a significant factor in driving up rent prices, many landlords are also looking to raise rates before the new digital real-time Rental Index for commercial properties takes effect. According to the owner of several office buildings in Dubai, the introduction of this index will determine future rent increases based on a star rating system for each building, much like the system already used for residential rentals.
Since 2022, both Grade A and Grade B office properties in Dubai have seen a steady increase in rental prices. However, Grade B office buildings—often managed by smaller, non-institutional operators—are experiencing more fragmented yet exponential growth. In contrast, institutional Grade A landlords typically prioritize long-term relationships with tenants, valuing stable, international tenants over higher short-term rental rates.
Developers and Landlords Aren’t Waiting
While the Dubai Land Department has not provided a specific timeline for when the real-time Rental Index will apply to office properties, developers and landlords are already making moves. The next lease renewal is an opportunity for landlords to raise rents to levels that they are comfortable with before the index is introduced.
Landlords are aware that if tenants do not want to pay the higher rates, they are free to leave. The assumption is that there will always be demand for office space in Dubai, and as a result, tenants are being pressured into agreeing to these higher rents or risk eviction.
Robert Thomas, Director at Cushman & Wakefield Core, explains that the RERA rental calculator allows tenants to face rent increases of up to 20%. Some tenants are renewing leases at rates set during the pandemic when rents were lower. However, the new rate hikes are seen as a way for landlords to adjust quickly to the current market conditions before the real-time rental system is implemented.
Tenant Worries and Challenges
For tenants in various parts of Dubai—whether in Deira, Al Quoz, or Ghusais—these rent hikes are causing considerable concern. One business owner of a mid-sized company, who has been occupying their office for 17 years, recently faced a 20% rent increase after paying only 7% increases over the past two years. Despite their long-standing tenancy, the landlord has not been responsive to their requests, pushing them to accept the higher rent or vacate.
As landlords in Dubai aim to maximize their rental income before the new index system takes effect, tenants are feeling the pressure. Many businesses are finding it challenging to keep up with these rising costs, especially when rents are being adjusted to market conditions that feel more aggressive than ever.
Office Vacancy Rates and Demand for Space
Despite these rent increases, demand for office space in Dubai shows no signs of slowing down. According to Harish Fabiani, founder of Indialand Group, vacancy rates in Grade A office buildings are as low as 5%-10%. However, many of these buildings require more time to be ready for occupancy, which is why tenants are increasingly opting for ready-to-move-in offices.
As a result, rents for both Grade A and Grade B office spaces in Dubai have surged by 15%-20%, and in some cases, even more. Interestingly, even large companies are opting for Tier 2 office spaces, where rents are more affordable compared to the soaring prices in Grade A properties.