Growth trajectory of Dubai’s commercial real estate market

The commercial real estate market in the first half of 2021 has been extremely active.

Both buyer and tenant enquiries for properties have been through the roof and we have also seen more sales than usual. The commercial market is usually made up of 85-90 per cent lettings transactions compared to only 10-15 per cent of sales transactions. But this quarter, we’ve seen this change significantly to around 60 per cent lettings and 40 per cent sales.

We are seeing more tenants looking to make the switch to buying office space because of the growth of their business and greater awareness about the value of commercial real estate in Dubai. Some offices in Dubai have been leased for several years, and most of these businesses could have paid off for their office space with the amount they have paid their landlord in rent.

The number of sales enquiries we’ve had in Q2 has increased by 122 per cent year-on-year and 57 per cent compared to Q1 2021, while enquiries for lettings has risen by 88 per cent year-on-year and 66 per cent quarter-on-quarter. Amongst these enquiries, we have had buyers unsure on committing and the commercial team have had a lot of educating to do. There are so many rewards to be gained from buying a commercial space – in fact the return on investment can even be much higher than that of a residential purchase.

For example, we recently sold an office with a sitting tenant in JLT for Dhs6.2m that generated a net return of 9.3 per cent for the purchaser. Often, by looking at the tenant’s profile, you can get a rough idea on how long they will be there as most companies will have a three- to five-year plan – this is where investors turn to commercial over residential as they can provide a much higher ROI and a more stable tenant, resulting in a more stable income.

The buyers we see coming from outside of the UAE have been lured by the way Dubai has navigated through the pandemic with only a brief but strict lockdown. The city has continued to operate to a degree where many businesses have been able to survive and, in some cases, grow and emerge.

A lot of the companies that are buying commercial properties are holding companies who operate in several industries. They are setting up a hub in Dubai as they see this as one of their safest options. The city is already a global hub and is easily accessible, making it the perfect place for a business.

The commercial market is performing much like the villa communities in Dubai. If a unit becomes available for let or sale in a good condition, desirable location and at an attractive price, it is taken straight away. These spaces are becoming few and far between. If you need a property of between 800 sqft and 1,100 sqft which would cater for around eight to 10 employees – there will be many offices available. If you have a company with 25 to 30 people requiring an office of between 2,500 sqft and 3,500 sqft, there will only be a few properties available in a desirable location.

There is a significant undersupply for these spaces.

Emrah Yar is the head of commercial at Allsopp & Allsopp 

Taken from Property Finder’s Prestige special report in Gulf Business’ August issue