Dubai office rents stabilise at AED 238/sqft as Grade A scarcity persists

Average market rents across Dubai stabilised at AED 238 per square foot during the second quarter of 2026, marking the first quarter without rental growth since the first half of 2021, according to Savills Middle East's latest office market report. The pause in rental escalation does not signal a correction — rather, it reflects a period of rental stabilisation supported by limited Grade A availability and low vacancy rates across Dubai's prime office locations.

The thesis is straightforward: Dubai's office market continues to face a structural shortage of institutional-grade space, following a prolonged period of muted completions over the past four years. City-wide office rents stand at AED 211 per square foot, reflecting a 16% year-on-year increase with no significant quarter-on-quarter change, Cushman & Wakefield Core reported for Q1 2026. The divergence in reported averages — AED 211 versus AED 238 — reflects differing methodologies and segment weightings, yet both consultancies confirm the same underlying dynamic: absorption has outpaced supply, compressing vacancy and anchoring pricing power with landlords.

Dubai recorded sharper gains across secondary and premium office segments in Q1, with Grade B offices leading the market at 23.4 per cent annual growth, followed by Grade A at 19 per cent and prime offices at 17.2 per cent, according to JLL data cited by Arabian Post. The outperformance of Grade B stock is a textbook symptom of scarcity at the top of the quality spectrum — occupiers unable to secure Grade A space in core precincts have been forced down the typology ladder, bidding up rents in what would ordinarily be considered secondary product.

Dubai's office market recorded total sales of AED 8.2 billion during the first quarter of 2026, with transaction values increasing by 203% year-on-year and volumes rising nearly 75% to approximately 1,600 transactions between January and March, Cavendish Maxwell reported. More striking still: the quarter marked a significant shift as off-plan office sales surpassed ready office transactions for the first time since Q3 2010, reflecting growing confidence among investors and businesses in future office developments. Off-plan office sales generated AED 6.4 billion during the quarter, representing growth of more than 760% compared with Q1 2025 and an increase of over 165% from the previous quarter.

The mandate from occupiers remains clear: quality matters, and tenants are willing to pay for it. Demand for high-quality office accommodation and flexible workspaces is expected to remain strong, particularly across the financial services, technology, trading and professional services sectors, Savills noted. Banking and finance accounted for 32.5 per cent of office demand in H2 2025, while technology contributed 23.1 per cent — both sectors concentrated in Grade A space in core districts, supporting pricing in prime locations.

The supply pipeline offers little relief. Approximately 1.9 million square feet of office space is scheduled for delivery during 2026, with the pipeline expected to increase to more than 4.2 million square feet by 2030. Yet much of the forthcoming Grade A supply is anticipated to be pre-leased or absorbed by existing occupier demand, limiting its immediate impact on market conditions. Approximately 73,300 square metres of office space was delivered during Q1, including DIFC Square, a 55,700-square-metre Grade A development that was fully leased before handover. Immersive Tower, scheduled for completion in July 2027, already has a significant volume of space under offer, underlining continued occupier demand for future Grade A supply.

Leasing velocity has moderated, but the underlying fundamentals remain intact. Dubai Land Department data recorded 38,082 office leasing transactions during Q2 2026, a modest 4% quarter-on-quarter increase, driven primarily by new leasing activity in smaller office units. Data from Dubai Land Department and Savills internal records indicate that 97% of all office deals completed in Q1 2026 were for units of 3,000 square feet or below, reflecting both new market entrants and existing occupiers securing satellite offices under rental protection frameworks.

Dubai Chamber of Commerce recorded more than 71,830 new companies joining in 2025, contributing to a steady pipeline of new entrants. Dubai Land Department data showed property transaction values reached AED 252 billion in the first quarter of 2026, with investments crossing AED 173 billion and foreign investment rising 26 per cent, pointing to continued inflows of sovereign-backed and institutional capital.

The rental stabilisation observed in Q2 should be read as a natural deceleration after an exceptional run — not as the onset of a cyclical downturn. While rental growth has paused quarter-on-quarter, rents remain 14% higher year-on-year compared with Q1 2025. The market has entered what Savills characterises as a "more balanced phase" — a recalibration in which occupiers take more time to evaluate options, but in which the structural shortage of Grade A space continues to underpin pricing power in prime precincts. For investors with exposure to institutional-grade office assets in DIFC, Business Bay, and Downtown Dubai, the thesis remains defensible: limited supply, sustained occupier demand, and a diversified tenant base anchored by financial services and technology — sectors with long-term growth trajectories and minimal sensitivity to short-cycle volatility.