Office Rents Climb Across UAE Hubs Arabian Post

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Arabian Post Staff -Dubai

UAE office rents rose at double-digit rates in the first quarter of 2026 as limited prime supply, resilient tenant demand and stronger renewal activity kept pressure on occupiers across Dubai and Abu Dhabi, even as new leasing decisions became more cautious amid regional uncertainty.

Abu Dhabi's prime office rents increased 11.7 per cent year on year, while Grade A and Grade B spaces rose 5.1 per cent and 4.2 per cent respectively. Dubai recorded sharper gains across secondary and premium office segments, 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.

The figures point to a commercial property market still shaped by a shortage of high-quality space in core districts. Companies seeking central locations, modern specifications and access to transport links continued to face limited choices, forcing some occupiers to renew existing leases or shift to Grade B assets that meet operational needs at comparatively lower cost. That shift has pushed rental growth beyond the prime segment and widened competition for well-managed buildings outside the most expensive clusters.

Dubai's office inventory stood at 101.1 million sq ft at the end of the quarter, while Abu Dhabi's total office stock reached 4.18 million square metres. Vacancy remained tight in both cities. Abu Dhabi's citywide office vacancy was just 1.4 per cent, with prime vacancy at 0.1 per cent. Dubai's citywide vacancy rose to 7.3 per cent after new deliveries, while prime vacancy edged up to 0.7 per cent, still leaving little room for large occupiers seeking immediate space.

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Leasing activity showed a more selective market. Office rental contract registrations declined 6 per cent year on year in Abu Dhabi and 7.7 per cent in Dubai. New monthly contracts also softened, falling 19.7 per cent in Abu Dhabi and 20.6 per cent in Dubai in March compared with February. The pullback reflected a wait-and-see stance among some businesses, particularly where expansion plans require major fit-out spending or long-term commitments.

Renewals, however, told a different story. Dubai recorded an 11.2 per cent year-on-year increase in office renewals, signalling that existing tenants remain confident about maintaining operations but are less willing to relocate in a constrained market. For landlords, the pattern has preserved pricing power. For tenants, it has increased the cost of delaying decisions, especially in areas where near-term supply is limited.

The performance comes against a broader economic backdrop in which financial services, technology, professional services, construction and trade continue to underpin demand for commercial space. Dubai's role as a regional headquarters hub, Abu Dhabi's push to expand financial and technology clusters, and the UAE's policy focus on non-oil growth have kept demand active despite pressure from higher operating costs and geopolitical disruption.

Retail property also showed signs of tighter supply, though performance varied by format and customer base. Dubai's existing retail inventory reached 56 million sq ft, with citywide vacancy narrowing to 4.8 per cent. Abu Dhabi's vacancy rate stood at 8.9 per cent, reflecting a more stable but still competitive market.

Dubai's super-regional malls recorded 12.4 per cent annual rental growth, while prime super-regional properties posted a more modest 1.7 per cent increase. Abu Dhabi's prime super-regional malls held rents at AED5,524 per square metre, supported by selective demand from retailers seeking dominant destinations with strong catchment areas.

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Retail leasing conditions were mixed. Dubai's new retail rental contracts declined 9.9 per cent year on year, indicating softer demand from some categories exposed to tourism flows and discretionary spending. Abu Dhabi performed better on registrations, with total retail activity up 3.6 per cent and new contracts rising 16.7 per cent.

Landlords have responded by offering more flexible leasing structures, including turnover-linked rents, occupancy-cost-ratio arrangements and short-term rent relief in selected cases. These measures have helped maintain occupancy while allowing retailers to manage pressure from changing consumer behaviour, cost inflation and uneven tourist spending.

Domestic-focused retail formats, including community centres, neighbourhood malls, wellness concepts, food and beverage operators, and home-grown brands, have shown greater resilience. Tourism-dependent luxury and destination retail remain more exposed to travel disruptions and weaker spending by high-value visitors, creating a two-speed market within the broader sector.

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