How to Rent an Office for a Company in the UAE

The United Arab Emirates is a sought-after destination for businessmen of various levels from many countries around the world. Its advantageous geographical location, economic stability, well-developed legislation, and favorable tax policies allow foreigners to successfully develop their businesses. To establish one's own enterprise, an office is necessary, and it is also important to understand the peculiarities of commercial real estate leasing in the UAE.

Commercial Real Estate in the United Arab Emirates

The UAE is actively developing, with numerous large-scale construction projects being realized every year. Various types of premises are emerging, including offices, retail spaces, warehouses, and others. Real estate in the Emirates is characterized by high construction quality, well-thought-out projects, and advanced technological equipment. Foreigners can become not only tenants but also owners of commercial real estate in Dubai or another emirate if they wish. However, it is essential to understand the legislation and peculiarities of the local market.

The legal form of the company is of great importance; offshore companies are prohibited from renting office space in Dubai and other emirates.

Onshore Companies

An onshore company has the right to rent office or other premises. The requirements for the premises largely depend on the free economic zone (FEZ) in which the company is registered. The general rule is that the building must be located within the territory of the FEZ of registration. In some FEZs, it is allowed to rent a virtual or shared office (used by several firms).

Another option is to rent a cabinet or a "desk" from a secretarial organization. This option is beneficial if a large office space is not needed, and it is planned to use it infrequently. However, it is not inexpensive - the annual rent for a "desk" will be no less than $1300.

Local Companies

Local companies, jointly owned by a foreigner and an Emirati partner, are required to buy or rent only a physical office; shared or virtual offices are prohibited. There are no restrictions on the place of registration; it can be Dubai or another emirate. Periodic checks are conducted, and if the company is not found at the registered address, it faces a significant fine.

Office Rental in the UAE

The right to lease commercial real estate is granted by a valid business license or registration permit if the company is still being registered.

Important points:

• The leased premises must correspond to the type of activity specified in the license. After the amendments of 2021, the legislation of the United Arab Emirates expanded the list of activities permitted for foreigners, now comprising over a thousand items;
• Renting one office by multiple firms is only allowed if they have the same composition of shareholders and identical structure;
• Only commercial premises are subject to lease; placing an office in a residential building is strictly prohibited;
• The office area should correspond to the number of employed personnel – approximately 9 m2 per person. The minimum area is about 30 m2. The number of residency visas that can be obtained by the company depends on the size of the premises.

Types of Offices

Two options are possible when renting a physical office:

• Fitted office – a space with finishing ready for work. It can be rented fully furnished, or the tenant can arrange the furnishings themselves;
• Shell & core requires preliminary repairs, with the premises having only concrete flooring and unfinished walls. Its price is lower, but it's a questionable saving. Conducting repairs with prior project approval will require a lot of time and money. This option is justified if a specific layout is needed, and finding a ready-made space is not possible.

The number of permitted visas for foreigners depends on the type and size of the office space:

• Physical space – a real office, the number of employees is calculated based on the area (one visa per 9 m2);
• Flexi desk – a virtual office granting only three visas;
• Serviced office – a fully furnished serviced office rented from an office space provider, granting four to five visas depending on the area.

Types of Lease Agreements

There are four main formats:

• Modified-net lease. Expenses for maintaining the premises are divided by agreement between the owner and the tenant. It is considered the most convenient form;
• Triple Net lease. All payments are borne by the tenant. This form is economically beneficial to the owner but extremely unpopular among tenants;
• Land lease. The tenant receives a plot of land with the right to build a commercial building on it. After the lease expires, the plot is returned to the landlord along with all constructions;
• Gross lease. Determines a fixed amount of monthly payment. Expenses are fully borne by the owner. This is the most common format.

Documentation Package

The registration procedure is strictly regulated by law. Potential tenants must document:

• Ownership rights to the company;
• Right to use the real estate;
• Correspondence of the leased premises to the business license.

Additional documents may be required, including:

• Business license or registration permit;
• Copies of passports or Emirates IDs of business owners;
• Recommendation letters from previous landlords;
• Bank account statement;
• Credit history information.

The contract specifies the signing date, property address, terms of use, agreement period, rent cost, possibility of remodeling, and other conditions. After signing the contract in Dubai, it must be registered with EJARI – an online real estate registration system.

EJARI System

The initiative for its creation was taken by the Real Estate Regulatory Agency (RERA). Registration of lease agreements in this system has been a mandatory requirement for landlords and tenants since 2010. It legitimizes contractual relationships, making them transparent. This helps to avoid manipulations and resolve conflicts that arise in court. Typically, the property owner sends the contract for registration to EJARI, while the tenant covers the procedure costs.

After registration in EJARI, it is necessary to contract with utility services for water and electricity supply, as well as to obtain insurance against damage. After these steps, the office setup can commence.

Payment Features

Payment is typically made through bank checks in most cases. The number of payments is stipulated in the contract, usually four to six payments per year, but one-time payment is also possible.

Upon signing the contract, additional expenses are specified – payments for utilities, maintenance, internet, air conditioning, waste disposal. Usually, the tenant covers these costs. Additionally, a security deposit (5% of the annual rent) is required, serving as collateral and subject to refund.

The lease term starts from 12 months. Be prepared for an increase in rent upon contract renewal. Usually, the rate remains the same for the first two to three years, then increases annually by approximately 5%.

Late payment of rent can have serious consequences, and the contract stipulates penalties for returned (bounced) checks.

In the event of non-payment within a month, the landlord can take legal action. In 2022, an agreement was signed between the Dubai Land Department (DLD) and the largest bank in the UAE, Emirates NBD Bank, allowing payments to be debited from the tenant's bank account.

For a legally sound and most advantageous office rental in Dubai, contact The Level Consulting. The team of experienced experts is ready to handle the entire process of office search and documentation.