JLL: Dubai office squeeze intensifies as vacancy drops to 0.3%

Dubai’s prime office vacancy has fallen to just 0.3%, with only 33,000 sq m of new Grade A space due imminently, intensifying competition among occupiers and driving a marked shift towards early renewals and longer seven- to nine-year commitments.

These trends were outlined by Dana Williamson, head of offices, business space and retail MENA at JLL, in an interview with Real Asset INSIGHT’s editor Jason Mitchell.

Williamson said the supply–demand imbalance reflects “genuine market fundamentals rather than speculation,” with prime vacancy at 0.3% and citywide vacancy at 7.7%. She explained that sustained demand from both existing and new occupiers, coupled with minimal incoming Grade A stock, is pushing rents upwards and forcing tenants to secure space much earlier in the cycle.

Prime rents have increased 17.3% year-on-year to AED 359 per sq ft (AED 3,864 per sq m), equivalent to $1,043 per sq m. Williamson said occupiers are responding by committing to longer leases, “averaging seven to nine years, compared to the three to five-year average a few years ago,” as they seek cost certainty and protection from competitive bidding scenarios.

Tenant behaviour is shifting accordingly. Renewals have risen 6.1% in 2025, while new leases have fallen 21.1%. Williamson said this marks a clear “flight to certainty,” with limited relocation options driving occupiers to lock in existing space before competing landlords can bid rents higher.

Furthermore, mixed-use developments continue to exhibit robust fundamentals, supported by projected UAE construction spend of $192.7 billion between 2025 and 2030. These schemes benefit from diversified revenue streams and reduced vacancy risk, particularly in major urban locations.

Meanwhile, the logistics sector remains one of the strongest performers. Dubai’s industrial market maintains a 94% occupancy rate across 25.26 million sq m of supply, supported by e-commerce expansion and the Emirate’s role as a regional trade and distribution hub. Premium-grade A facilities in JAFZA and Dubai Investment Park are achieving 97–100% occupancy, with rents starting at around AED 48 per sq ft.

Williamson said: “In the industrial sector, logistics remains the preferred choice for most investors, driven by high demand from online retailers and population growth across the Middle East. This trend is projected to continue, with double-digit rental growth anticipated in the coming years across Dubai, Abu Dhabi, and Saudi Arabia. The persistent supply shortage is expected to exert further upward pressure on rents.”

Retail performance is more uneven. Prime malls maintain a vacancy rate of 2.1%, while community centres remain closer to 11.4%, highlighting the divergence between destination retail and convenience-led formats.

Saudi Arabia’s regional-headquarters policy continues to reshape corporate behaviour across the Gulf. Williamson said the vacancy rate in key Riyadh districts has fallen to under 1%, as multinational companies expand their operational footholds in the capital. The policy has also “given rise to a ‘hub-and-spoke’ model, wherein companies maintain operational headquarters in Saudi Arabia while strategically rightsizing satellite offices in other Gulf cities, including Jeddah”.

This shift is stimulating parallel demand for housing and mixed-use development, supported by infrastructure investment, including the Riyadh Metro, where JLL is managing leasing for 733 retail units.

However, financing conditions remain selective. Investors are prioritising assets with strong pre-leasing commitments, established covenants or off-plan sales. Lenders are emphasising covenant strength and cash-flow stability as construction cost inflation erodes development margins. UAE infrastructure projects are projected to generate $292.2 billion in cash flows through 2030, while real estate projects are projected to generate $469.3 billion.

Furthermore, digital infrastructure is becoming central to regional strategies. Williamson said logistics and data centres are “rapidly evolving from ‘alternative’ assets to essential infrastructure components in modern commercial developments,” with hyperscale, single-tenant large-lease data centres in high demand.

Looking ahead, Williamson said: “Dubai’s office and mixed-use sectors are projected to maintain their strong performance through 2027.” Abu Dhabi faces a limited supply of Grade A space until early 2026, while Riyadh is forecast to sustain strong demand for Grade A space.

She explained: “In conclusion, key growth markets in the UAE and Saudi Arabia are projected to experience increased demand for industrial, data centre, and logistics assets in the coming years, reflecting the evolving requirements of businesses in the region.”

For the full interview see: