Dubai Landlord to Bolster Office Space as City Defies Slump

One of Dubai’s largest office landlords is planning to expand its portfolio as the Middle East’s business hub continues to defy a global slump in commercial real estate.

Tecom Group، whose tenants include Meta Platforms Inc. and Alphabet Inc.، is considering new developments as well as acquisitions to boost its portfolio، Chief Executive Officer Abdulla Belhoul told reporters، without disclosing details of how much the firm is looking to invest. The company، which reported a 49% increase in annual profit، is also planning to buy more land، he said.

Boosting the city's commercial real estate market

An influx of businesses setting up in Dubai has boosted the city’s commercial real estate market and helped end a multi-year property slump. City-wide office occupancy rates are at an all-time high of 89%، according to real estate consultancy Cushman & Wakefield Core، stoking concerns of tight supply down the line.

That’s a stark contrast to major cities around the world where office landlords are being squeezed by a combination of higher borrowing costs and lower occupancy، as many companies continue to allow employees to work from home — at least part of the time.

For example، Brookfield’s tower in the heart of Dubai’s financial district has been one of their best performing assets globally at a time when other properties — including in Los Angeles and London’s Canary Wharf — have been hit by falling occupancy.

Real Estate Exposure

The commercial real estate market in the US has been hit especially hard as rising borrowing costs pummel valuations. Office properties in particular have come under stress since the start of the pandemic when the rise in remote work chipped away at demand from tenants. Prices for offices in the US slumped 25% in the past 12 months through December، according to real estate analytics firm Green Street.

On Thursday، Japan’s Aozora Bank Ltd. became the second lender to surprise investors with losses tied to US commercial property heightening concerns about global banks’ exposure to souring real estate bets. Earlier، New York Community Bancorp slashed its dividend and stockpile reserves due to its exposure to the sector.

Read More: Brookfield Cuts Value of Property Holdings Amid Market Swoon

Still، occupancy across Tecom’s commercial and industrial properties in Dubai rose to 89% in 2023 from 86% a year earlier، according to a statement. The firm، which operates several business districts in the city، reported a 15% increase in new tenants including AstraZeneca Plc.

Tecom’s revenue and net profit are “two-and-a-half to three years” ahead of what was initially envisioned when it went public in 2022، Belhoul said. “This has put us in a great position to explore all types of expansion modes.”