According to the latest research by a global property consultant, reflecting the growing buoyancy in the Dubai property market, prime headline office rents have started to stabilise.
However, rents remain at nine-year lows overall, leaving occupiers firmly in the driving seat, according to the research published in Knight Frank's biannual Summer 2021 Dubai Office Market Review.
The report said business confidence in the UAE had been a critical factor in improving conditions. In addition, the latest purchasing managers' index figures showed sustained business expansion activity for seven consecutive months, highlighting the positivity percolating through the economy as it shakes off the lingering impact of the pandemic.
"Job creation rates have quickened at their fastest pace since the end of 2019, and that is helping to underpin the rise in office space requirements Knight Frank is recording," Knight Frank analysts said in their report.
"And the technology-media-telecoms (TMT)sector sits at the heart of new demand for office space, with over 22 per cent of all new requirements in the second quarter being linked to TMT businesses."
Knight Frank expects about 100,000 new jobs to be created across the UAE by the TMT, storage and transportation sector over the next five years - the most for any sector.
"Dubai's global hub status and reputation as a centre for innovation is drawing in tech start-ups from around the world, but these businesses too, like their more established blue-chip counterparts, are eager to occupy sustainable buildings, and the availability of such space remains limited across the city. This is both a challenge and a clear opportunity for landlords, developers and investors," Faisal Durrani, partner – head of Middle East Research at Knight Frank, said.
He said the big challenge would be how landlords and businesses will attract workers back to their desks in a meaningful way.
"We know the green agenda will be core to this and is likely to influence the real estate decisions of nine out 12 businesses in the future, so landlords are in a way being presented with a roadmap to safeguarding future demand and, therefore, income."
As Dubai's prime office stock in core location ages, the calls to refurbish will grow louder, or such assets could potentially face rising voids and potential obsolescence, he said.
Bur Dubai is an example of a growing gulf between the quality of stock available and what businesses want. This mismatch has contributed to the 20 per cent drop in rents in the area over the last 12 months, said the report.
Allsopp & Allsopp Real Estate has also reported huge rises across the board for its commercial department in Q1, 2021, with commercial sales transactions increasing by 142 per cent since Q1 2020.
"The commercial market is usually made up of 85-90 per cent of lettings transactions compared to only 10-15 per cent lettings and 40 per cent sales," said Emrah Yar, head of Commercial, Allsopp & Allsopp Real Estate.
"The environmental, social and governance (ESG) agenda has become mainstream, and we are already seeing evidence of its impact on rents and occupier behaviour," added Durrani.
"Take the newly completed Supreme Court Chambers on Dubai Creek, for instance. The automated car parking system results in less vehicle emissions and makes more efficient use of space - a clear indication of how sustainability has been placed at the heart of the user experience."
"And this is already attracting the attention of a number of legal sector tenants. In fact, the building has rapidly achieved over 25 per cent occupancy, with its sustainability credentials being key to its success," he said.