From 9% to 18.7%: how one assumption doubles an office yield

Office project presentations often quote a yield range. Here is how one is constructed, on a real example.

The property and the numbers

An office of 4 823 ft² (about 448 m²) in a Business Bay tower, priced at AED 25 160 078. The stated yield is given in three versions:

• At a rent of AED 500 per foot: 9.08%
• At 800: 14.83%
• At 1 000: 18.67%

The project itself: 91 offices across 51 floors, a 260-metre tower, floorplates from 4 000 to 17 000 ft², entry from AED 21m at around AED 5 000 a foot, a 50/50 payment structure, handover in Q4 2029.

Where the trick is

A band of "9 to 18.7%" looks like a range of possible outcomes. It is not a range — it is three different rent forecasts laid out in a table. The investor sees the top figure and remembers it, although the probability of each scenario is not stated.

Only one thing needs checking: what rent is actually being paid today in comparable buildings in the same district. Everything above that is an assumption about the future, and its cost falls on the buyer.

How to read calculations like this

• Take the bottom figure as your base. If the deal does not work at 9%, the upper scenarios will not save it.
• Ask for the source of each rate. Is 500 from signed leases and 1 000 a forecast for 2029? Then they are different kinds of thing.
• Deduct the service charge. In premium office towers it reaches AED 25 a foot and moves the result noticeably.
• Account for the term. Handover in 2029 means the rate is only tested in several years, while you start paying now.