Dubai's office market recorded its first quarterly rent decline in nearly five years, as softer leasing activity and a gradual release of secondary stock bring healthy relief to a long-tight market.
Office Supply: Upcoming Supply to Improve Market Balance
Over 0.88 million sqft of office space was delivered in Q2 2026, including City Tower and Technohub 4, with a further 1.13 million sqft due by year-end, led by Sweid One, Innovation 2 (DIFC Living), and new office developments within Dubai CommerCity. Much of this supply is already pre-let, limiting its near-term market impact. While deliveries accelerate from 2028 onwards, the pipeline remains focused on high-quality developments in core business districts. We expect any increase in vacancy and moderation in rental growth to be gradual, while a growing share of institutional, single-owned office stock will improve the availability of premium space and leasing options for regional and global occupiers.
Market Sentiment: Resilient But More Cautious
Leasing activity softened during Q2 2026 as occupiers adopted a more cautious approach following the regional conflict. While renewal rents remained stable, new lease rents softened as transaction volumes declined, with many occupiers deferring expansions and delaying leasing decisions. Rental softening has been concentrated in Grade B stock, which accounts for nearly 70% of Dubai's office inventory, while Grade A, single-owned and institutional assets have remained resilient. There has also been no meaningful downsizing by global occupiers, with most retaining their existing footprints. Flex space operators have meanwhile become one of the largest occupier groups, taking up sizeable office space across the city. Rising demand for flexible workspaces reflects occupiers' preference for greater flexibility during a period of heightened uncertainty, while landlords increasingly view flex operators as strategic partners to enhance occupancy and activate large floorplates.
Pricing: Rents Remain Firm With Limited Stock
Average city-wide office rents in Dubai stand at AED 205 per sqft, down 2% QoQ, marking the first quarterly decline in office rents in nearly five years. While overall occupancy remains high, city-wide levels have eased marginally as more strata office stock has returned to the market. We expect additional secondary space to become available in the coming months as relocations, lease expiries, and occupier right-sizing gradually bring more stock back to the market. As with market cycles, this moderation in both rents and occupancy should be viewed as a healthy market moderation, improving availability and affordability after a prolonged period of exceptionally tight market conditions.
