Today's Edition
A. SREENIVASA REDDY (ABU DHABI)
The UAE office sector demonstrated resilience during the first quarter of 2026, with market fundamentals remaining robust across both Abu Dhabi and Dubai, according to a market dynamics report by JLL.
Rental rates in the UAE office sector maintained strong growth momentum, with both Dubai and Abu Dhabi recording double-digit annual growth amid tight vacancy conditions and constrained supply. Abu Dhabi’s prime office rents rose 11.7% year-on-year, while Grade A and Grade B office spaces recorded increases of 5.1% and 4.2%, respectively.
In Dubai, constrained availability in core business districts pushed occupiers towards Grade B office spaces, which led rental appreciation with a 23.4% year-on-year increase, followed by Grade A at 19.0% and Prime office space at 17.2%.
“Rates across both cities remained broadly stable on a quarter-on-quarter basis, reflecting landlord pricing discipline and limited available stock,” the report said.
“Existing occupiers demonstrated commitment through strong renewal activity, particularly in Dubai where renewals increased 11.2% year-on-year, reflecting sustained occupier demand and constrained supply dynamics,” the report said.
However, office rental contract registrations in Abu Dhabi and Dubai recorded year-on-year declines of 6.0% and 7.7%, respectively, mainly due to a pullback in new contract registrations amid heightened occupier caution during March following broader regional uncertainty.
New contract registrations in March declined 19.7% in Abu Dhabi and 20.6% in Dubai compared with February 2026. Despite the softer new leasing activity, Dubai’s renewal contracts remained resilient, rising 11.2% annually, indicating that existing occupiers largely maintained confidence in market fundamentals.
Vacancy rates remained exceptionally tight across both markets during the quarter. Abu Dhabi’s citywide office vacancy rate fell to 1.4%, while prime office vacancy stood at just 0.1%. Grade A vacancy in the capital was recorded at 1.0%, while Grade B stood at 3.3%.
Dubai’s citywide office vacancy rate edged up to 7.3% following new building deliveries, though JLL said this remained low by historical standards and reflected normal absorption timelines rather than weakening demand. Prime office vacancy in Dubai stood at 0.7%, while Grade A vacancy reached 3.8% and Grade B stood at 10.5%.
Office inventory in Dubai reached 101.1 million square feet during the quarter, while Abu Dhabi’s total office stock expanded to 4.18 million square metres, reflecting continued project deliveries.
The report said development pipelines in both cities maintained healthy momentum despite global and regional supply-chain pressures affecting construction materials and procurement costs.
Developers are responding through phased procurement planning, strategic sourcing arrangements, and contractor negotiations to maintain project timelines while balancing cost efficiency and quality standards, the report said.
Taimur Khan, Head of Research, MEA at JLL, said strong economic fundamentals and agile occupier and landlord strategies helped the UAE office sector navigate a period of measured activity during the first quarter.
“Despite short-term adjustments, demand remains robust, signalling the market’s inherent strength and positioning it for sustained growth as demand for prime spaces accelerates amid tightening supply,” Khan said.
Market sentiment has responded positively to improving regional conditions, according to the report.
“Since the ceasefire announcement in early April, enquiry volumes have strengthened, demonstrating the sentiment-responsive nature of the current environment,” the report said.
“Strong market fundamentals cushioned the impact of broader regional uncertainties, driving resilience and sustained growth across prime office and retail segments in both Dubai and Abu Dhabi,” the report said.
The report said the immediate increase in activity indicates underlying demand remains robust, with organisations prepared to move ahead with expansion plans as conditions continue to stabilise.
“Looking ahead, transaction momentum is expected to strengthen as regional confidence firms,” the report observed. “Market prospects remain compelling, supported by limited available stock — particularly in prime segments where Abu Dhabi prime vacancy stands at just 0.1% and Dubai at 0.7%.”
