How to Evaluate a Commercial Building in Dubai

Jaime Platt
Sep 30
3 min read

Updated: Oct 1

Practical frameworks, additional costs, and ROI clarity for investors

Evaluating commercial real estate in Dubai requires a much different lens than evaluating residential properties, the scale is larger, leases are longer, and the income potential can be significantly higher, but only if the fundamentals stack up. Whether it’s an office tower, a retail unit, a warehouse, or an industrial yard, the true measure of value goes beyond headline ROI. Investors need to weigh location, tenant profile, operating costs, and long-term functionality to understand if its an asset or the potential for a liability.

1. Location

Although Dubai is structured exceptionally well, investors still need to evaluate the location of the unit and how it relates to their target tenant. Here are some points I recommend to look at.

Offices: Visibility, metro access, parking, and connectivity to business hubs.
Retail: Footfall is everything, proximity to residential communities, schools, and highways determines sales for the majority of businesses.
Warehouses & Industrial Yards: Logistics-focused, access to major roads, ports, and airports is key. Jebel Ali, DIP, and DIC are prime examples.
Future-proofing: Planned infrastructure (metro expansions, road networks, port development) can dramatically alter value.

2. ROI Frameworks That Actually Work

Headline yield gives the flashy numbers but digging deeper as part of your due diligence will show the true picture.

Gross Yield = Annual Rent ÷ Purchase Price
Net Yield = (Annual Rent – Running Costs) ÷ Purchase Price
IRR (Internal Rate of Return) = Long-term profitability factoring in rent escalations, exit value, and holding period.

The general ROI returns are as follows:

Residential buildings with retail: 5-8% net ROI
Offices & retail: 7–10% net ROI
Warehouses & industrial: Often 9–12%+ ROI

3. The Costs That Eat into Returns

Beyond purchase price and rent, factor in:

Service Charges: Higher per sqft in office towers and retail malls; lower in standalone warehouses.
Fit-Out Costs: Especially for retail tenants or specialized industrial users.
Vacancy Periods: Offices can take 6–12 months to re-let, warehouses and yards can lease more quickly but may still have periods of vacancy.
Transaction Costs: DLD fees, agency commission, conveyancing.
Upgrades & Compliance: Fire safety, MEP, cooling systems, and in industrial - EHS and logistics compliance.
DREC charges: There is a 20% sublease fee on the contract value for its leased government lands and also has rent charges based on the property's value per square foot, with typical payment terms of 4 installments and a 10% security deposit.

4. Age & Efficiency of the Asset

The UAE doesn't really have any buildings that I would consider truly old, however if maintenance has been poorly managed or no upgrades have taken place then it's something to consider during the buying process. Is it something simple that can be upgraded at a lower costs, interiors such as kitchen or bathrooms, or has there been more serious damage due to floods, leaks, mould etc. A starting point for considerations include:

Offices: Newer towers offer better layouts, lower service charges.
Full residential buildings: Older units in high-footfall areas often outperform newer ones for ROI.
Warehouses: Functionality trumps age, high ceilings, loading bays, and yard access matter more than build year.
Industrial Yards: Long-term leases on well-connected yards often outperform prime offices on ROI.

5. Lease Structure & Tenant Quality

Offices & Retail: 3–5 years standard, though anchor tenants may commit longer.
Warehouses & Industrial: Leases can stretch 5-10 years, often with corporate covenants, providing security, however some contracts can be on a yearly renewal.
Increases: 5% annual increases are common, but sometimes, these increases are not annual, but every few years as industrial leases experience more gradual uplifts unlike the yearly increases we can see in residential.
Tenant Covenant: A multinational in logistics or FMCG offers far stronger income security than a small trading outfit.

6. Exit Liquidity

Commercial property isn’t flipped as easily as residential. Consider:

Offices: Exit buyers are often funds or corporates, making liquidity slower.
Retail: Prime community retail always sells, but underperforming units can sit for years.
Warehouses & Industrial: Some of the most liquid assets in Dubai right now, as demand for logistics space grows.
Who’s the buyer? HNWIs, family offices, and institutional funds are all active in Dubai’s commercial space.