Offices: The Market Moving the Other Way

The most interesting divergence in the UAE right now is not between two emirates. It is between two asset classes in the same city. While Dubai's residential market spent 2026 pausing, its commercial market did something close to the opposite, and the transaction record makes the gap look wider than most commentary has registered.

The numbers behind the vacancy headline

The vacancy figures are the ones usually quoted. Dubai office vacancy fell to 6.1 per cent in the second quarter of 2026 from 7.7 per cent a year earlier on Savills' reading, and Abu Dhabi prime availability was reported at 0.1 per cent, which is effectively no space at all.

What gets quoted far less is what commercial values have done in the Land Department record, and it is a remarkable series. Dubai commercial property traded at a median of AED 651 per square foot in 2020. It reached AED 710 in 2021, AED 866 in 2022, AED 1,087 in 2023, AED 1,399 in 2024 and AED 1,820 in 2025. Year to date in 2026 the median sits at AED 2,800, up 54 per cent again.

That is a near-tripling between 2020 and 2025, then a step change on top of it. Set it against residential, where 2026 is tracking 2.5 per cent above 2025 and the emirate-wide median has been flat since June, and the divergence is not subtle. Two asset classes in one city, one flat and one revaluing.

Volume tells you what kind of rise it is

A price series alone cannot distinguish genuine repricing from a change in what happens to be selling, so the volume figures matter. Dubai registered 1,167 commercial sales in 2020 and 6,095 in 2025, with total value rising from AED 1.4 billion to AED 18.3 billion. Activity grew alongside price for five straight years, which is what a real expansion looks like rather than a mix effect.

2026 has changed the shape. Commercial volume is down 27 per cent year to date, in line with the wider slowdown, yet total value has already reached AED 23.3 billion, comfortably above the whole of 2025. Fewer transactions, much larger ones. That is the signature of institutional and floor-scale buying replacing individual unit purchases, and it is worth watching, because a market carried by a smaller number of larger buyers is thinner than its value total suggests.

Rents confirm it, with a warning inside

To the second quarter of 2026, Grade B office rents rose 31.5 per cent year on year, Grade A rose 26.2 per cent and prime rose 13.6 per cent, while average Dubai rents held at AED 238 per square foot, the first quarter without growth since early 2021.

The ranking is the part to read. Grade B outpacing Grade A, and both outpacing prime, means tenants are being pushed down the quality ladder by price rather than pulled up it by preference. That is a late-cycle signal in offices exactly as it is in housing. It says the tightness is real, and it also says the cheapest space is where the rent growth has furthest still to run and the least protection if demand softens.

Why the two markets diverged

The straightforward reading is an economy absorbing people and companies faster than it is building space for them. DIFC ended 2025 with 8,844 active companies, up 28 per cent. ADGM reported 44,339 people employed inside it, up 51 per cent. Every one of those employees needs a desk, and offices take three to five years to deliver from a standing start.

Residential supply, by contrast, has been arriving continuously and is scheduled to keep arriving: 103 projects of 400 units or more are due to complete between October 2026 and the end of 2027, close to 74,000 units, overwhelmingly studios and one-bedroom apartments. Housing has a pipeline answering its demand. Offices largely do not, and that asymmetry is the whole explanation.

What it means for a portfolio

Commercial earns its allocation on structure as much as on momentum. Businesses sign for years at a time, with rent reviews written into the contract, so the income behaves less like a rental and more like a coupon. Tenants fit out at their own expense and rarely leave casually, and vacancy, when it comes, arrives with notice rather than at the end of a twelve-month lease.

The trade-offs are real and should be stated plainly. Commercial vacancy is lumpier, since one departing tenant can empty an entire floor. The buyer pool at resale is narrower than for apartments. Values now sit at the top of an exceptional run rather than the bottom of one, which is a materially different entry point from 2020 and demands more of the underwriting, not less. Service charges and fit-out obligations vary far more than in residential, and they decide the net.

None of that argues against the asset class. It argues for buying it on the lease rather than on the trend: the strength of the tenant, the length of the term, the review mechanism and the price per square foot against comparable floors in comparable buildings. In a market where the residential cycle has paused and offices have not, contracted multi-year income from a strong covenant is the position the evidence currently supports, provided it is bought at a number that would still work if the rent growth stopped tomorrow.