Due to the fact that Dubai has been increasing in popularity as a global business hub, many international companies are opting to set up offices in the emirate. A few of the main driving factors behind such demand include a beneficial business environment, reduced government fees, attractive visa schemes, and more. Dubai is an emerging destination for prominent global companies, including Meta and Visa. If you are looking to set up your business in the emirate, you have to be well-guided in the process of renting commercial properties to avoid any risks. From required documents to types of lease agreements, this article was written to provide you with the essential details to rent commercial property in Dubai.

How to Rent Commercial Property in Dubai

Before setting up a business and renting a commercial property, you have to obtain a trade licence, which is issued by the Dubai Economic Department (DED) or a registered free zone, such as the Dubai Multi Commodities Centre (DMCC) or Dubai Silicon Oasis (DSO), among others. The trade licence will also assist you with targeting the locations that offer various categories of commercial real estate in Dubai NB! In line with the UAE Commercial Companies Law (the “CCL”), which was amended back in June 2021, full foreign ownership of companies incorporated in the UAE under the CLL (onshore companies) is effective, including over 1,000 commercial and industrial licence activities.

Find the Proper Location

Taking into account your licence type, you have to do research regarding the best districts to rent commercial property in Dubai. For example, if you have a DMCC-free zone licence, your workspace has to be in the same area. In addition, the following factors have to be considered

<ul><li>Viability of the business in the chosen location</li><li>Accessibility of the area to generate a sufficient footfall</li><li>Availability of parking spaces for employees and potential customers</li></ul>

Office Type and Employee Visas

In the UAE, companies have the privilege of offering visas to foreign employees; nevertheless, the office type and space have a particular impact in this case. For instance:

<ul><li>Flexi desk: up to three visas</li><li>Serviced office: four or five visas, depending on the office size</li><li>Physical space: one visa for every 29 ft.</li></ul>

Make Sure the Necessary Papers are in Order

There are strict rules in terms of the purpose of commercial real estate in Dubai. For example, your warehouse cannot be used as an office and vice versa. As a result, you are recommended to have all of the required documents in order, which includes, but is not limited to:

<ul><li>Business ownership proof</li><li>Obligatory permits to use the selected commercial space</li><li>Compliance of the property with the existing plans</li></ul>

NB! Commercial rentals in Dubai are regulated by Ejari, which is a legally binding document confirming the authenticity of the rental. If you wish to modify the rented commercial property, for instance installing cubicles, then you have to mention it in the lease contract. It is essential to accurately fill out all of the information regarding your business to avoid any disputes in the future. Please also be sure that the lease agreement clearly mentions the property’s address, rental rate, and terms of the lease with an effective start date. Alongside the documents mentioned earlier, the landlord may ask you to provide the following:

<ul><li>Copy of your business plan</li><li>Personal and corporate financial statement(s)</li><li>Bank references</li><li>Current credit scores from three reporting bureaus</li><li>Previous/current landlord references (for existing businesses that are relocating)</li><li>Provisional approval from the emirate’s licensing authority</li><li>Company manager’s passport</li><li>Signing authority letter</li></ul>

Factor Your Budge

Undoubtedly, budget is one of the most essential factors to remember when renting a commercial property in Dubai. Along with the annual rental rate, you have to take into account the security deposit and any further costs associated with the property before making the final decision. It is recommended to use a RERA Rent Increase Calculator to be aware of any potential rent fluctuations when renewing the tenancy agreement.

Types of Lease Agreements

While the terms ‘rent’ and ‘lease’ are used interchangeably, they are actually completely different practices. That being said, the rental contract is concluded when the term is up in a year and when the timeframe expires; the contract is automatically renewed. The lease period lasts a minimum of a few years and can even be prolonged up to 99 years, and in contrast with a rental contract, a lease agreement has to be renewed with a new contract upon its maturation. There are four common types of agreements in terms of commercial property rentals, which are as follows:

<ol><li>A <strong>gross lease</strong> is a basic type of lease where the tenant pays a predetermined rental rate on a monthly basis, while the landlord takes care of any <a href="https://metropolitan.realestate/blog/living/6-main-costs-of-renting-a-property-in-dubai/">associated property costs</a>, including maintenance, insurance, and tax.</li><li>A <strong>land lease</strong> is used in situations when a plot of land is leased out. The tenant is granted a right to construct a building on the plot of land for their preferred business purpose. Once the lease expires, the landlord gets their land back along with the building.</li><li>A <strong>triple-net lease</strong> is the least popular type of lease since it is quite costly for tenants, but very beneficial for the landlord. In this case, the tenant pays the rent and handles expenses regarding insurance, taxes, maintenance, and so on.</li><li>A <strong>modified-net lease</strong> is the most preferred type of lease since it has many benefits for landlords and tenants, and expenses are shared between both parties.</li></ol>

After Renting a Commercial Property

Upon signing a lease on commercial property, the following steps should be taken:

<ul><li>Activate the electricity and water through DEWA.</li><li>Obtain insurance that covers property damage.</li><li>If you rent a shell and core unit, then you will have to find an interior designer. A standard <a href="https://metropolitan.realestate/projects/offices/">office</a> that ranges in size from 1,000 sq. ft. to 4,000 sq. ft. takes about six to eight months before it is up and running. However, fitted properties are ready to use at once since they are equipped with desks, furnished meeting rooms, and more.</li></ul>

NB! In the case of interior alterations, you have to make sure the respective clause is present in the contract and subsequently obtain a NOC from the landlord, building manager/developer, and Dubai Municipality/Free Zone Authority.

Sub-Letting Commercial Real Estate

It is allowed to sublet a commercial property in Dubai once you have written approval from the landlord. In order to avoid any disputes, it is highly recommended to add a clause regarding the lease agreement beforehand.

Early Termination of a Rental Contract

The commercial tenant can terminate the agreement at any time provided they have enough finances to pay a monetary penalty to the landlord for not completing the determined timeframe. As a rule, the penalty in Dubai amounts to two months of rent, and it is considered to be compensation to the landlord for any losses that may have been incurred. Of course, you have to warn your landlord of your plans beforehand, and based on your circumstances, you may also be lucky enough to negotiate the penalty sum.

Paying Rent for Commercial Property

When it comes to paying rent, a cheque is the most common payment method in Dubai. Local landlords opt to take cheques issued by the tenant’s personal or company bank account in the UAE, meaning that all cheques for the whole lease time frame are to be given to the landlord when signing the agreement. Similar to the duration of the commercial rental contract (three to five years), the number of cheques is negotiable, but as a rule, it ranges between four and six. If prefered, you also have the opportunity to pay the entire sum in one cheque, per annum. Besides the rent and administration fees/maintenance charges, tenants have to pay 5% of the total rental amount as a security deposit. NB! In July 2022, the DLD signed an agreement with Emirates NBD to allow rent payments to be debited directly from a tenant’s account.

How Can We Help?

Our real estate agents at Metropolitan Premium Properties are ready to assist you with finding the most suitable location for your business whether it’s a beauty salon, a grocery store, or a digital marketing agency. We will inform you of the current average asking prices, market trends, and the latest legislative changes to help you benefit from the maximum potential of the rented property. On your behalf, we will handle communication with potential landlords, prepare required documents, register an Ejari contract, and handle the rental cheques. Our qualified specialists will also manage DEWA activation, air conditioning, gas, and telecommunications at the property you choose to rent, in order to save your time and effort.