Many landlords are raising rents of commercial parties, especially in high-demand areas, to secure higher base rates
Tenants Seek Affordability Ahead of Dubai’s Commercial Rental Index Launch
As Dubai prepares for the launch of its much-anticipated commercial rental index, a shift is occurring in the market. Many tenants are moving to more budget-friendly locations, while others are renegotiating or renewing their leases early. In doing so, they aim to secure long-term agreements that lock in current rental rates.
Industry experts highlight that landlords in Dubai are already adjusting rental prices for commercial properties, particularly in prime areas, to capitalize on higher rates before the index becomes active.
Earlier reports by Khaleej Times revealed that the Dubai Land Department (DLD) plans to introduce a rental index for commercial properties in the first quarter of 2025. This follows the recent rollout of the DLD’s smart rental index for residential properties.
The smart rental index, powered by artificial intelligence, offers fair and accurate valuations. It employs a classification system designed to enhance transparency and ensure tenants receive accurate rental assessments.
“Several significant market trends are emerging ahead of the commercial rental index launch,” said Ben Bargh, managing director of Commercial Real Estate Consultants (CRC), a Betterhomes affiliate. “Landlords in prime locations are raising rents to establish higher benchmarks. There’s also a noticeable emphasis on upgrading properties to attract tenants seeking sustainable, high-quality spaces. At the same time, tenants are prioritizing long-term leases to lock in existing rates and avoid potential fluctuations.”
Bargh also noted that tenants are actively taking steps to manage costs, such as relocating to less expensive areas, downsizing their office spaces, or moving to co-working facilities. “Some tenants are renegotiating leases early, signing long-term agreements, or requesting flexible payment terms to improve cash flow,” he added.
Proactive Rent Adjustments by Landlords
According to Bargh, many landlords are taking proactive measures by modernizing their properties to meet the rising demand for premium, sustainable office spaces. These upgrades are designed to align with anticipated market changes, especially with the expected transparency the rental index will bring.
“Landlords are also increasing rents in advance, particularly in high-demand areas, to secure higher base rates before the index introduces more standardized benchmarks,” Bargh explained. “This trend is especially noticeable in Grade A office spaces, where rent prices have already surged due to limited supply and high demand.”
Dubai’s commercial real estate market has seen extraordinary growth in 2024, recording 9,038 transactions—a 24% year-on-year increase. The total transaction value reached an impressive Dh90.1 billion, reflecting an 11% year-on-year growth.
Shortage of Premium Office Spaces
Dubai faces a significant shortage of high-quality office spaces due to rapid business expansion and a surge in new company registrations.
“For years, prime office locations have maintained occupancy rates above 95%, driving substantial rental increases,” Bargh said. “Despite plans to add more than 9 million square feet of office space by 2028 through key developments such as Tecom’s Innovation Hub Phase 2, One Za’abeel Tower, and DIFC 2.0, the supply remains insufficient. This mismatch between supply and demand is expected to keep rental and occupancy rates high for the foreseeable future.”
Bargh emphasized that the most critical shortage lies in Grade A office spaces. “This growing demand for premium office environments comes from both multinational corporations and regional companies expanding their operations in Dubai. Occupancy rates for these spaces are at unprecedented levels, with some prime areas such as DIFC, Downtown Dubai, Business Bay, and Sheikh Zayed Road reporting rates above 95%.”
To address this demand, several off-plan commercial projects featuring Grade A offices have entered the market, including developments like The One by Prestige One and Capital One, among others.
