Dubai’s commercial real estate sector is in direct defiance of the global market, thanks to a commitment to fully integrated ecosystems and ease of setting up business. McKinsey’s latest Empty Spaces and Hybrid Places report paints a discouraging portrait of global commercial real estate recovery.
Demand for office and retail space in major commercial centres, like New York, London, and San Fransico, is expected to remain below pre-pandemic levels, with a 13 percent decrease predicted by 2030 compared to 2019.
Yet, despite this gloomy outlook, Dubai’s commercial real estate market continues to outperform international business hubs. Healthy leasing activity spurred by strong demand from international and local companies has led not only to a shortage of Grade A quality office space, reports CBRE Mid-Year Review, but also rental increases in Grade B and Grade C segments with several prime developments within central commercial districts near-full occupancy.
Major companies recognise the benefits of in-person, collaborative work environments and are increasingly implementing progressive policies to bring employees increasingly back to the office, with the likes of Google, Amazon, and Meta among the latest to reinstate in-person or hybrid work.
The TECOM Group portfolio performance tells a similar story of positive and continued economic growth and an uptick in commercial activity in Dubai. We have achieved an 87 percent occupancy rate across our overall portfolio of 10 business districts in the Emirate in the first half of 2023 and we continue to build on our track record of attracting and developing new projects which allow for businesses to create their own space in-line with a more modern, digital, and collaborative space.
Commercial sales transactions in Dubai are growing exponentially in tandem, the CRC Q2 2023 Market Report finds, reiterating the increasing levels of commitment to the market and the city’s position as a gateway to the region.
The local commercial sector’s robust performance is underpinned by sustained economic growth and business activity. The non-oil economy is growing on the back of economic diversification initiatives, with the Dubai government’s latest data showing 2.8 percent GDP growth in Q1 2023 to AED111.3 billion.
Pro-growth initiatives such as the Dubai Economic Agenda ‘D33’, a roadmap to double the size of Dubai’s economy over the next decade, and progressive business legislation are strengthening the outlook for long-term economic growth.
Investor confidence in Dubai’s commercial ecosystem is mounting, reflected in an uptick in new company licenses and underpinned by a succession of bilateral and strategic partnerships since 2021.
The UAE’s Comprehensive Economic Partnership Agreements (CEPA) are opening new investment and trade corridors – a major draw for international firms – and the UAE’s recent inclusion into BRICS further promotes dialogue and strategic relations with developing and emerging economies at an international level.
Talent follows on the heels of the cross-sector economic opportunities emerging in Dubai, with the city’s high quality of life, outstanding investment environment, robust infrastructure, progressive laws and visa categories, and diversified career options added draw for skilled professionals. The influx of new residents has similarly stimulated record-breaking demand in the residential real estate segment.
Dubai welcomes international firms to thrive
Several international firms have relocated or expanded headquarters to Dubai in recent years to take advantage of its strategic location as a gateway to the Middle East and North Africa (MENA). The number of customers in our districts has jumped significantly between H1 2022 and H1 2023 as firms look to embed greater agility and resilience in global growth models. More than 100,000 people now work within the TECOM Group business districts.
Offices aren’t alone in driving the commercial real estate sector’s performance. An increasing number of brands are launching regional research and development centres and factories, tapping into the government’s long-term plans to localise manufacturing and innovation.
In contrast to the reported concerns in international markets, demand for high-quality commercial property will likely continue throughout 2023 and into 2024 in Dubai. The city’s positive macro-backdrop and its growing relevance and positioning as a global business hub in the MENA region provide strong tailwinds for the commercial leasing sector.
Appetite for quality leasing spaces in commercial and industrial districts will grow as Dubai’s business ecosystem expands with new businesses, talent, and investment, even as global peers jostle to find a place in the new normal.
Follow us on
