Increased demand for quality spaces, combined with strong net absorption, is creating upward pressure on Grade A rents in the UAE
JLL, the leading professional services firm specialising in real estate, investment management, and development consultancy, explored the wider impact of the future of work on the real estate sector in an insightful discussion with industry experts and thought leaders at their ‘Future of Work’ event.
While the return-to-work phenomenon is being set in motion by organizations across the globe, the role of the workplace is evolving, further necessitating a long-term transformation of the real estate portfolio of companies to succeed in a post-pandemic world. According to JLL’s Future of Work Survey, 77% of Commercial Real Estate leaders agree that investing in quality office spaces will be a greater priority than expanding the total footprint of their developments.
When it comes to the UAE, the country’s office sector has witnessed a remarkable turnaround, rapidly bouncing back from the pandemic era. According to the Demand Study conducted by JLL for Grade A office space in Dubai, in the last two years, not only has the sector seen a resurgence in demand, but it also saw healthy absorption in H1 2022, nearly matching pre-pandemic levels. This recovery was fueled by a combination of three factors: flight to quality, limited supply, and new market entrants.
Further elaborating on the aforementioned, industry experts at the event highlighted the trends that will continue to shape the architecture of corporate real estate (CRE) within the country, reflecting on key tenets such as the widespread adoption of dynamic and flexible working, a greater emphasis on sustainability outcomes, and technology enforcements.
Employee expectations have made environmental and social aspirations mainstream, and organizations are now placing ESG solutions at the top of the corporate agenda. Green building certifications are now a de facto requirement of premium offices, according to JLL’s eighth edition of Premium Office Rent Tracker (PORT), which provides a snapshot of the global premium office market. The report revealed 87% of premium office buildings surveyed have environmental sustainability certifications such as LEED, BREEAM, or NABERS, up from 84% last year. In high-end markets, the proportion of sustainability-certified buildings has increased to 95%, and companies seeking to be future-ready are also investing in health and wellness-related certifications.
With regard to leveraging intelligent technology investments, it is observed that most organizations lack market-leading capabilities to collect data on a real-time basis and undertake advanced forms of analysis. This represents a huge opportunity for CRE functions in maximising the transformative potential of big data for strategic planning and decision-making to remain competitive, resilient, and forward-thinking.
While offering a forward-looking outlook for 2023, JLL stalwarts also highlighted how rising demand for flexible workspaces and competition for new spaces has put upward pressure on Grade A rents. The city’s continued healthy demand-supply balance has also resulted in a renewed appetite among landlords, developers, and investors for new projects, creating opportunities for Grade B refurbishments to capture demand spillover.
Thierry Delvaux, CEO of JLL for the Middle East, Africa and Turkey, said: “The flight towards planning and delivering quality office spaces that promote employee health and wellbeing has led to a greater focus on experience-driven assets boasting first-class building amenities and sustainability or green building credentials. In the year ahead, the upward pressure on rents for quality spaces – now surpassing levels previously seen in 2015 – are expected to continue with only limited new deliveries in the pipeline for the next three years.”
JLL’s latest PORT also revealed the business hubs of Dubai, Riyadh, and Abu Dhabi saw significant gains in occupancy costs over the past year. With USD 103 per square feet per year on Net Leasable Area (NLA) basis, Dubai International Finance Centre (DIFC) was in the 16th position in JLL’s market rankings.
Dana Williamson, Head of Offices, Business Space and Retail at JLL MENA, said: “The impact of the future of work extends beyond office spaces, snowballing into consumer spending habits and demands across other sectors such as retail, hospitality and residential. As a result, developers across segments must reconsider their portfolio and design ploys and prioritize key aspects such as work-from-anywhere policies, sustainability requisites and a technology-first approach, all of which is bound to have a direct impact on the value, desirability, and marketability of physical space.”
Other speakers at the event including Ben Johnston, Director, Offices and Business Space Leasing, Alida Saleh, Head of Sustainability Consulting, MEA; Lee Daniels, Global Consulting Practice Leader (People Experience); and Hamzeh Magableh, People Experience Co-Lead MEAT, also assessed the impact and importance of positive People Experience in achieving business resilience while outlining how leveraging technologies to accommodate the emerging demands for hybrid work can unlock new opportunities to boost operational performance and productivity.