KHALED AL KHAWALDEH (ABU DHABI)

Office rental rates in Abu Dhabi and Dubai have experienced double-digit growth over the past year, highlighting strong demand just a few years after the pandemic threatened to derail the entire sector.

According to a report from real-estate services company Asteco, office rentals in Abu Dhabi were up 8% and 24% in Dubai, year-on-year, due to a mixture of "strong economic conditions" and low supply, particularly in the capital.

"This upward movement in office rents is largely due to the limited availability of prime office space in Abu Dhabi, coupled with increased demand from expanding businesses. Government initiatives aimed at attracting foreign investment have also played a significant role in driving this demand," the report stated.

During the COVID-19 pandemic, the office markets in Abu Dhabi and Dubai faced significant challenges, including reduced demand, increased vacancies, and declining rental rates as businesses adopted remote working and scaled-back expansion plans.

Rents in many areas across the two cities dropped sharply, with a gradual recovery to pre-pandemic levels only materialising by 2022.

Despite the continued growth of remote working trends, many areas have seen extraordinary year-on-year growth, underscoring the continued value businesses place on prime office locations.

The report highlighted areas such as Al Maryah Island in Abu Dhabi and Dubai International Financial Centre (DIFC) as particularly attractive to businesses.

Dubai's Business Bay stood out with 38% YoY growth, while Jumeirah Lake Towers reported the highest increase, with office prices nearly doubling (47%) over the last year.

Sharjah and Al Ain also demonstrated steady growth in their office rental markets.

Sharjah recorded a 6% annual increase in rents, which the report said was driven by its affordability and appeal to small and medium-sized enterprises (SMEs) noting the city's strategic location, connecting Dubai and the Northern Emirates.

Al Ain, meanwhile, experienced a 2% annual rise in rental rates, primarily supported by demand from government-related sectors and local businesses.

Although growth in these cities was more modest compared to Abu Dhabi and Dubai, the report acknowledged their critical role in serving businesses with specific regional needs.

Overall, the Asteco Q3 2024 UAE Real Estate Report underscored the resilience of the UAE's real estate sector.

In the residential market, rents and sale prices continued to rise due to strong demand and limited supply, particularly for high-quality properties.

The hospitality sector also experienced robust recovery, with higher occupancy rates fuelled by tourism and corporate events.

Additionally, the industrial real estate sector remained healthy, supported by the UAE's booming logistics and e-commerce industries.