Increasingly more companies feel encouraged to set up operations in the emirate following positive policy announcements, which has led to increased office space demand, especially for Grade A assets, according to Savills Q1 2023 Dubai Office Market in Minutes update.
The real estate company revealed that enquiry levels and leasing activity were led by a mix of new entrants and consolidation activity, with the former taking up a 40% share of the pie. In terms of sectors, technology, media, and telecom (TMT) and banking, financial services, and insurance (BFSI) have been the most active.
Demand displayed strength amid limited availability and upcoming supply, which naturally pushed up rental values. On average, Grade A developments across locations witnessed a 2% quarterly increase; however, the DIFC micro-market witnessed rental values increase by 11% across projects.
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Just under 75% of demand was witnessed for office spaces up to 5,000 sq ft, suggesting that corporates, many of which were new entrants, were carefully assessing their space requirements against the backdrop of flexible and hybrid working trends and uncertain economic conditions.
Paula Walshe, Director-Transactional Services said, “Amid the global trend of the tech sector re-evaluating its requirements, from staffing to real estate, select tech firms across Dubai have also reported right-sizing their office space to rationalize costs. However, in sharp contrast, some new tech companies have been leasing space, resulting in a net increase in occupancy levels across the city.”
The unpredictable global economic developments have also meant that occupiers are looking for short-term plug-and-play office spaces. The serviced office segment, a key provider of these options to companies, has been among the key drivers of office demand across the city over the last quarter.
Swapnil Pillai, Associate Director – Middle East Research “Over the next three quarters, the upcoming supply of office space, especially Grade A, will be limited across the emirate. Given that current enquiry, levels are steady and are expected to remain so, we anticipate rental values to continue their upward movement for the rest of the year.”
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