Business Bay commercial rents rose about 25% a year for three years running

The trajectory of commercial rents in Business Bay over three years looks like this: 2022 +21%, 2023 +28%, 2024 +28%. An average of about 25.7% a year.

How that becomes a forecast

What usually follows is extrapolation. At a current rate of AED 350 a foot a year and the same pace maintained, you get 440 in 2025, 553 in 2026 and 695 in 2027. Payback calculations of eight years and double-digit dollar yields are built on numbers like those.

Why it cannot be calculated that way

• 25% a year is recovery, not a norm. It runs off a low base after years of stagnation and ends when the base levels out.
• Extrapolation ignores supply. Rents rose while almost no new offices were delivered. With large office projects arriving, competition changes the picture.
• Leases are long. The rate on a new contract and the market average are different quantities: a significant share of tenants sit on contracts from earlier years.
• Indexation is limited. Rent increases at renewal are regulated, and "plus 28% for every tenant" is not achievable in practice.

How to test forecasts like this

Look not at the district average rate but at specific signed leases in comparable buildings over recent months. And calculate payback on today's rate with no indexation — if the deal makes sense that way, any growth becomes a bonus rather than a condition.