Landlords in Dubai and Abu Dhabi Maintain Advantage Amidst Tenant Competition in UAE Office Market

According to a JLL report, landlords in Dubai and Abu Dhabi maintained their pricing positions in the second quarter, offering only selective incentives, even as tenants rushed to occupy space in an increasingly tight office market. Although some tenants temporarily paused expansion plans due to existing uncertainties, space reduction activity remained minimal. Sustained demand from both new and existing tenants led to the rapid absorption of available space by other users, ensuring rental rate stability and preserving the negotiating power of landlords in the UAE office market.

Despite cautious short-term decision-making, corporations continued to advance their long-term real estate strategies, indicating confidence in the fundamental foundations of the markets. This dynamic was reflected in a sharp increase in lease registrations.

In Dubai, the total number of registrations grew by 24.6% year-on-year and 15.1% quarter-on-quarter. This growth is largely attributed to a surge in new contracts, which, according to JLL, reflects increased business confidence and the city's resilience to regional uncertainties. Abu Dhabi demonstrated more moderate and stable growth: registrations increased by 5.4% annually and remained roughly flat quarter-on-quarter, supported by a 7.1% year-on-year rise in contract renewals. JLL notes that this indicates the confidence of existing tenants in the fundamental aspects of the capital's office market, even while new players seek opportunities.

Market activity in both cities improved compared to the more cautious stance of the first quarter, especially regarding new inquiries. Although some potential tenants hesitated to sign immediate agreements, they continued to actively explore available space and monitor market developments, revising their strategies.

Space Availability at Record Lows

During the second quarter, both cities maintained extremely low vacancy rates. The average city-wide vacancy rate in Dubai decreased to 6.1%, down from 7.7% the previous year. Limited supply of premium office space forced users to consider Class B and even Class C buildings. Vacancy in Class B decreased from 10.9% to 8%, and in Class C—from 12.7% to 10.9%. Prime space availability remained stable at 0.7% quarter-on-quarter, while Class A vacancy slightly rose to 4.2%.

The situation in Abu Dhabi was even tighter: the overall vacancy rate was only 1.4%, and prime space availability was 0.1%. Class A vacancy reached 1.4%, and Class B—2.7%, reflecting stable market fundamentals with minimal changes in both annual and quarterly periods, according to JLL.

Rental Rate Growth

In Dubai, Class B properties led the rent growth, showing an increase of 31.5% year-on-year and 8.7% quarter-on-quarter. Class A followed closely, demonstrating a rise of 26.2% year-on-year and 8.8% quarter-on-quarter. Premium rents increased by 13.6% compared to last year. The market situation in Abu Dhabi proved more mixed. Premium rates rose by 11.7% annually, but declined by 0.3% quarter-on-quarter. Rental rates for Classes A and B remained largely stable on a quarterly basis but showed an annual increase of 5.1% and 4.2%, respectively. JLL noted that the new 'Rent Freeze' decree, introduced at the end of the second quarter, should limit further rent growth in the capital in the short and medium term.

Pressure on Supply Pipeline

The second quarter brought approximately 38,000 square meters of total Class A leasable area to Abu Dhabi, bringing the total office stock to about 4.2 million square meters. No major completions were recorded in Dubai, and the total office stock remained at 101.4 million square feet. Abu Dhabi is expected to add about 57,000 square meters of office space in the second half of the year, while Dubai anticipates the delivery of nearly 940,000 square feet. JLL reported that several previously operating buildings in Dubai have been temporarily closed for renovations in response to growing demand for higher-quality premises, while developers continue to grapple with supply chain issues affecting material imports.

Given the supply deficit relative to strong demand and the presence of numerous projects already secured with preliminary lease commitments, landlords are prioritizing timely completion despite these challenges. Developers are focusing more on economic efficiency and quality assurance. The flexible workspace segment continued to expand as companies sought alternatives with lower risks, reduced capital expenditure, and shorter lease terms. The increasing integration of artificial intelligence and automation into business processes is transforming workforce needs, making flexible office solutions increasingly attractive to organizations undergoing operational transformation and facing market uncertainty.

Forecasts suggest that regulatory changes will shape the next phase of the market, particularly in Abu Dhabi, where the rent freeze policy—limiting rent increases except in the Abu Dhabi Global Market or newly completed projects—should curb sharp quarterly rate growth. Nevertheless, JLL predicts that annual rent growth will persist through the end of the year in both emirates.

Similar stories

www.khaleejtimes.comAugust 25, 05:00

Dubai FlexiRent Initiative Offers Flexible Rent Payment Options to Tenants in Dubai

Residents of Dubai can gain greater flexibility in rent payment methods thanks to the emirate's FlexiRent initiative. This program provides various options, including monthly payments, deferral periods, and other benefits.

However, it should be noted that this scheme does not guarantee that any tenant will automatically transition from four or one check to monthly payments. The initiative is implemented through the voluntary participation of real estate companies, which independently determine which properties qualify for the program and what payment plans or incentives they are willing to offer.

FlexiRent is designed to reduce the financial pressure associated with large upfront rental payments for residents while helping property owners increase occupancy rates, reduce payment delays, and attract long-term tenants.

FlexiRent allows participating property management companies to offer tenants diverse flexible payment schemes, such as monthly, quarterly, or semi-annual installments. Depending on the company, tenants may also be eligible for discounts, promotions, deferral periods, or other rental-related bonuses.

Participation in FlexiRent is voluntary for management companies, and even those who join can decide which specific vacant or suitable units to include in the program. This means that a tenant can only choose a monthly or other flexible payment schedule if their property is covered by the program and the participating company offers such an option.

Benefits for tenants include reduced financial burden, as rent payments can be spread over the year instead of making large lump-sum payments; as well as more convenient payment schedules that can align with the tenant's income cycle.

Furthermore, the system ensures legal protection and transparency, as lease agreements remain within the ecosystem of the Dubai Land Department. The application process is also simplified through digital onboarding, allowing payment terms to be configured via integrated systems.

According to DLD data, FlexiRent is available to UAE residents with valid residency documents. The lease agreement must be for a minimum of 12 months. The DLD website lists types of properties that may qualify for participation in this initiative, including apartments, villas, offices, and commercial spaces, but the selection of specific units remains with the participating property management company.

The interaction process works as follows: the tenant contacts the management company to inquire about the available FlexiRent benefits for the property. The company presents options, which may include flexible payments, deferrals, or other concessions. Then, the tenant and the company agree on the most suitable option, which must be included in the lease agreement.

Participating companies can offer monthly, quarterly, or semi-annual payments. The exact terms depend on the specific company and property. For example, a tenant paying 80,000 AED per year in four quarterly payments of 20,000 AED could pay approximately 6,667 AED monthly if such an option is offered.

The Dubai Land Department (DLD) establishes the regulatory framework and coordinates the work of FlexiRent, but the responsibility for the actual lease agreements and payment processes lies with the participating companies. They manage the suitable properties and implement payment schemes through their approved systems.

DLD has entered into partnerships with several real estate and property management companies under this initiative. Those listed on the DLD website include Wasl Properties, Deyaar Property Management, Dubai World Real Estate, Modern Real Estate, Dubai Investment Real Estate, SBK Real Estate, Rocky Real Estate, SRG Properties, Harbor Real Estate, Driven Properties, and Al Showaib Real Estate.

Tenants are advised to contact their management company directly to find out if it participates in FlexiRent and whether their specific property is on the list of participants. The goal of the initiative is to increase the attractiveness of rental properties to a wider range of tenants by reducing the burden of large advance payments.

DLD notes that potential benefits for property owners and companies include increased occupancy, improved cash flow, reduced payment delays, attracting new clients, and enhancing overall service levels. The ultimate objective is to create a more stable rental market where payment schedules better reflect the tenant's income cycle, and owners receive more predictable rental income.

www.khaleejtimes.comAugust 20, 11:12

Toyota residential building in Dubai to be demolished, residents ordered to vacate premises

The famous Toyota building in Dubai is slated for demolition, and its residents have been asked to leave their apartments. A real estate agent informed the Khaleej Times that no new tenants were allowed into the building as it was being prepared for dismantling.

Over the past few weeks, several long-term residents have already vacated the premises. Some of them shared memories of the building on social media.

Ahmed, an employee at a grocery store, lived in the building for the last five years and moved out last Friday. He told the Khaleej Times: 'We were among the last to move.' He added that he and several of his colleagues lived there because it was company housing. 'It was very close to our workplace, and the rent was very affordable.'

Ahmed specified that the building management requested residents to move out gradually. 'First, they asked people who lived in separate rooms to leave,' he reported. 'At first, we thought it was some kind of inspection regarding separate rooms, but soon we, the corporate housing residents, were also asked to move.'

The building, constructed in 1974, just three years after the founding of the UAE, is considered one of Dubai's first residential towers. It stands about 65 meters high and is a 15-story complex, which was one of three buildings near the site now located at the first intersection of the bustling Sheikh Zayed Road.

In 1981, the building became an iconic landmark after a large, bright red Toyota neon sign was installed on the roof, giving it its well-known nickname. This iconic sign remained in place for almost 40 years before being removed in 2018 after the advertising contract expired. In a move that pleased many residents and nostalgia lovers, the sign was restored in June 2022, once again illuminating the Sheikh Zayed Road skyline.