Dubai Launches New Commercial Rental Index
Dubai's New Rental Index for Commercial Properties
Dubai's real estate market is innovating once again: following the model of the existing rental index for residential properties, it extends the new rental index to commercial properties. This change will encourage owners of commercial properties to modernize their buildings if they wish to charge higher rent. The new index is expected to come into effect in the first quarter of 2025, announced Majid Al Marri, Director General of the Real Estate Registration Sector at the Dubai Land Department.
How the New Rental Index Works
Like the index for residential properties, the new rental index will consider multiple factors such as:
a, The building's rating (from 1 to 5 stars).
b, The building's age and condition.
c, The quality of maintenance.
d, Rental trends in the area.
e, Data from new and existing rental agreements.
These data points help enhance market transparency and encourage developers and owners to modernize their properties.
Challenges in the Commercial Real Estate Market
Dubai's office market, particularly 'A-grade' offices, is experiencing significant demand growth. The influx of business enterprises and foreign companies is driving up rental prices and property values. Simultaneously, the lack of new supply further exacerbates this trend.
According to the latest quarterly report from Asteco real estate consultancy and brokerage, the office market showed an average quarterly growth of 5%, with an annual increase of 21%. This growth was triggered by strong economic conditions and limited supply, especially in 'A' and 'B+' grade properties.
Latest Figures
Dubai's commercial real estate market experienced the following expansions in 2024:
a, In the first half of the year, 0.37 million square feet of office space came onto the market.
b, A further 0.35 million square feet of office space was added in the third quarter.
What This Means for Tenants and Owners
The introduction of the new rental index necessitates the modernization of properties, especially to justify rent increases. Factors such as building condition, maintenance standards, and general rental trends will play key roles. A more transparent system also benefits tenants by helping them to rent properties at market rates.
The Future of Dubai's Commercial Real Estate Market
The new index aims not only to increase transparency but also to enhance market dynamics. Economic factors such as the growing number of foreign companies and the resurgence of businesses further strengthen Dubai's position as the leading business hub in the region. The new rental index will assist in maintaining the real estate market's stability and long-term growth.
