The Evolving Office Landscape in Dubai: Supply and Demand Dynamics

More than 100,000 square meters of new office space will soon be handed over in Dubai, but pre-leasing activities are expected to limit the available supply significantly. This ongoing trend is a reflection of the thriving demand for office spaces, driven by both current tenants and newcomers to the market.

Strong Demand Amidst Limited Supply

As Dubai’s real estate sector solidifies its position as a global player, the demand for high-quality office spaces has reached unprecedented levels. Existing businesses and international companies are keen to establish themselves in Dubai, drawn by its strategic location and robust economic prospects. However, the ongoing undersupply of quality office accommodation—especially in prime free zones and central districts—continues to exert pressure on rental rates.

According to CBRE Middle East’s latest report on the UAE Real Estate Market, by the end of March 2025, average occupancy rates across assets in Dubai stood at around 94%, a notable increase from 90% in 2023. This upward trend signals a continuation of strong demand, coupled with a limited supply of newly available spaces.

Rising Rental Rates

With the demand for office spaces outstripping supply, rental rates in Dubai have also seen a pronounced increase. Average leasing rates have surged more than 20% year-on-year, forcing many occupiers to contend with rising costs upon lease renewal. Landlords are capitalizing on the scarcity of available accommodation, leading to bullish market conditions.

Supply Constraints Persist

The supply situation in Dubai’s office market appears unlikely to improve significantly until at least 2027. CBRE highlights that the current pipeline of real estate completions does not meet the latent demand, resulting in tight availability across both prime and secondary locations. Notable office deliveries anticipated in 2025 include developments at Dubai CommerCity and TECOM. However, with pre-leasing activities progressing, it’s anticipated that minimal space will be available for lease at the time of completion.

Matthew Green, Head of Research for MENA at CBRE, states, “Undersupply remains a key challenge for the UAE market across all real estate sectors. Rental growth and rising occupancy rates are a testament to this trend.” Despite some macroeconomic uncertainties stemming from global trade tensions, the UAE benefits from a diverse non-oil sector and a wide array of global trading partners, promising an optimistic outlook.

Abu Dhabi’s Office Market Thrives

Turning to neighboring Abu Dhabi, the office market is also experiencing growth, fueled by a dynamic non-oil sector and government investments that have stimulated demand. Average occupancy rates have climbed to 96%, with office rental rates witnessing a rise of approximately 13% year-on-year. Prime rents have notably increased by nearly 15%, although the number of new leases has dipped due to limited availability.

Residential Market Growth

The first quarter of 2025 has also revealed robust growth in Dubai’s residential real estate market. Increased rental rates and sales values compared to the previous year speak to an active development pipeline, particularly in waterfront areas and affordable communities. Over 25,000 new residential units have been launched, yet slower project deliveries have resulted in average rental rate increases of nearly 11% for apartments and 9% for villas.

Transactional property values have surged over 16%, reflecting consistent quarter-on-quarter increases, compounding concerns for residents facing heightened living costs.

Surge in Residential Transaction Volumes

In Q1, Dubai’s residential real estate transaction volumes surged by an impressive 23% year-on-year. Off-plan transactions saw a remarkable increase of 33%, while ready properties experienced an almost 5% surge. The total of 43,000 transactions recorded in this period marks one of the highest figures in recent times, excluding Q3 and Q4 of 2024, with a sales value reaching AED 115 billion. Off-plan transactions accounted for AED 79 billion (69%) of this total, showcasing strong market activity.

In contrast, while Abu Dhabi’s residential market has also experienced price increases, the growth in registered off-plan sales has slowed. However, the number of transactions for ready residential units has risen by 10%, underlining the demand from end-users and yield-focused investors.

As the Dubai real estate landscape continues to evolve, the dynamics of supply and demand in both the office and residential sectors remain critical for stakeholders navigating this vibrant market.