Offices in residential districts: Dubai Hills at zero vacancy and AED 350 a foot

The shortage of office space in Dubai has produced a solution that would have looked illogical a few years ago: offices are being built in densely populated residential districts rather than only in business clusters.

The example that proved the idea

Dubai Hills Estate: around 500 000 square feet of office space, a rent of roughly AED 350 a foot, vacancy of zero. All let.

The demand logic is simple. Medium-sized companies do not need an address in the financial centre — they need an office their staff can reach in fifteen minutes. In a district where tens of thousands of people live, such an office finds a tenant without advertising.

The next candidate is JVC

The arguments made for the district: entrances and exits already congested, meaning plenty of residents; housing volume expected to roughly double over two years; and almost no office space at all.

The calculation on a specific project

A small floor of four offices in a class A/B office project in JVC:

• Price: AED 9.8m
• Price per foot including 5% tax: AED 1 854
• Rent: AED 250 a foot
• Service charge: AED 15 a foot
• Calculated yield: 12.68%
• Structure: 50/50, with half coverable by a mortgage serviced out of the rent

What to check

The AED 250 a foot in JVC is an assumption, not a fact: there is no office market in the district yet, and there is nothing to confirm it with except the analogy to Dubai Hills. That is the point to look at first. The analogy is plausible, but Dubai Hills is a district with a different resident mix and different transport access.