Everything You Need To Know About Commercial Property In Dubai

Dubai is one of the leading commercial hubs for business and living. Global market exposure & state-of-the-art real estate facilities are luring businesses. The government is considering every possible relaxation and new laws to simplify the business & investment complexities in Dubai. It's the growth opportunities and favorable environment of the city that most entrepreneurs are making their first business choice.

The city is brimming with the countless commercial real estate Dubai spaces available for both purchase and lease. However, the prices might vary from the preference and location, yet with many choices, there is a commercial deal for everyone. The small businesses even consider taking the space on lease and tend to switch to permanent later.

Purchasing Or Leasing: What’s better in Dubai Real Estate?

Be it for small businesses or established ventures, this concern can be a game-changer. If the business/investor is looking forward to minimal investment and higher ROI, making the right choice is crucial. As per the experts, established businesses should go for direct commercial property purchase & plan for a long stay in Dubai. While newbie small businesses can opt for leasing properties to save a lot of upfront costs.

The expat entrepreneurs can have the best business exposure with the right conditions in Dubai. With long-term stay and direct commercial space purchase, they get to grow business at another level. The investment in buying in commercial space is going to recover in the upcoming years. Feel free from rental charges and focus more on what can assist in business expansion.

There are major four types of lease agreements to rent a commercial space in Dubai. These can impact the overall flexibility of the investment and hence must be chosen after proper understanding. Gross Lease

It is a basic lease that requires the tenant to pay a pre-decided rent amount every month. All sorts of additional expenses like tax management, insurance policies, maintenance expenses are on the landlord only.

Land Lease

In this agreement, a specific portion of land is leased out to the tenant on which business-related construction is allowed. Upon the completion of the agreement period, the tenant needs to return the land along with the building.

Triple-Net Lease

In this contract, the tenant has to pay the rent and bear additional taxation, insurance, maintenance, etc. It can offer the deal for the landlord, but the tenant has to face expenses.

Modified Net Lease

This agreement is designed to provide equal benefits to landlords and tenants. Every expense is shared between the two parties and there is no burden on one of them.

Further, there are other essential aspects to explore before investing in Dubai’s real estate.

Investment For Buying Commercial Property In Dubai

Below mentioned are the costing factors that every business owner should keep in mind before planning investment in Dubai.

1. Value of the desired property.
2. VAT (5%) & other commercial taxes.
3. Real Estate brokerage fees
4. Transfer charges of 4% to DLD (Dubai Land Department)
5. Trustee registration fees (Approx 4200 AED)

It is a general query that all businesses or investments can achieve high ROI in Dubai. Well, the answer is definitely yes to some extent for commercial real estate in Dubai city. The investments are focused to offer competitive ROI to aspiring entrepreneurs.

The reason behind the improved ROI is commercial units sticking to the same address. With a longer period of commitment, the commercial tenants can avoid the cost of shifting units. Every new space needs to be revamped for the business storage and organized approach. Moving to new spaces, again and again, impacts the business logistics. It becomes more difficult to keep changing the demand-supply chain & even require costs as well.

Purchasing Commercial Properties In Dubai

According to property law in UAE, the off-shore companies should own freehold Dubai properties under the company name. The registered venture should be registered with the Dubai Multi Commodities Center (DMCC). In the same manner, the businesses registered in the free zones can purchase the freehold commercial properties too. There are too many benefits of owning the property under the business name like investment security, privacy, full-fledged ownership, etc.

Renting Commercial Properties In Dubai

Like buying commercial properties in Dubai, the rented ones also come with their legal implications & capital need. The government runs the Ejari tenancy program to provide and regulate the commercial tenant's contract. The investors need to get registered under the Ejari program to rent a commercial place.

The program requires the commercial tenant to showcase the company authorization letter. Ejari tenancy program fees are around AED 170 (inclusive of VAT) and had to be borne by the company.

Although the terms rent and lease seem to have similar practices, both differ in multiple ways. A rental agreement can be for a month, week, year period and gets automatically renewed after completion. If the commercial tenant needs to terminate the same, there are a separate set of rules and processes to do the same. In the case of the lease agreement, the period of ownership is a bit longer ranging from a few years to 99 years. Once the lease agreement reaches completion, you need to renew the same with an updated agreement.

Taxation With Commercial Properties In Dubai

The commercial unit owner who is registered with the legal process and has a valid Tax Registration Number (TRN) can only ask for VAT from tenants. The landlord or owner needs to share the proper invoice with VAT and other charges breakdown with every payment made by the tenant.

The taxation rules for the buyers are quite different as compared to the rented properties. The new commercial property purchase requires a 5% VAT on the net property amount. The companies registered with TRN can recover the VAT amount for both commercial renting and purchase.

Considerable Areas To Find Commercial Properties In Dubai

The business owners and entrepreneurs have different ownership rules for mainland and free zone areas in Dubai. The latter one aims to offer 100% ownership of the company and allows business operations outside UAE. For mainland zones, the ex-pat needs to get UAE nationality & will have 51% of the business. But, with the free zone offering 100% ownership of the business, the investors are preferring it over other options. However, there is one limitation with free zone areas: they are bound to work with companies functioning outside the UAE.

Co-working Commercial Properties In Dubai

Co-working spaces are proven commercial spaces to provide maximum investment ease and business opportunities to entrepreneurs. With the global EXPO 2020 event, the demand for co-working spaces is again on the surge. The event has lured young business owners and professionals to Dubai that find co-working space units affordable and suitable to their needs.

There is no shortage of commercial co-working spaces in Dubai that can bring the pace in the company set up. With seamless management and less burden, it becomes easy to shape the growth of ventures. Many entrepreneurs are finding them helpful in getting a residency visa. Proper research can keep you away from confusion and help you make the right choice for a commercial storage option.

Final Word

In the end, we can conclude that Dubai is the perfect place to start a new business or make a new real estate investment. The commercial real estate Dubai market is going to boost by multiple leaps and bounds and there seems no stopping in the future. The city has well-equipped resources and favorable areas to run and expand businesses. From the high-growing economy to global trading hub exposure, the city has everything to offer aspiring business owners and entrepreneurs.

Dubai has almost every type of commercial space to choose from. No matter if you rent it or decide to go ahead with the purchase, every investment opportunity comes with several benefits. The relaxation with taxes and flexible agreements are providing ease to investors, unlike other cities. You can easily find a reliable real estate agency in Dubai to help with choosing the right property and area for commercial property investments. Since the city is catering to all types of business niches, new or old businesses can expand their operations in the Middle East.