Landlord fit-out contribution in Dubai: rent-free, cash, and what to ask for

What a landlord fit-out contribution actually is

The phrase covers mechanisms that are not interchangeable.

A cash contribution, written in some leases as a tenant improvement allowance or TIA, is a capped sum the landlord pays toward your Category B works. It is real money against your build cost, and it is the hardest of the three to get, because it comes out of a capital budget that somebody has to approve.

A rent-free period is months you occupy without paying rent. It costs the landlord revenue rather than capital, which is why it is offered first and conceded fastest. It does nothing for your construction budget. It helps your cash flow in the months when you are paying a contractor and not yet trading.

Landlord works means the landlord upgrades the unit at his own cost before handover: raised floor, ceiling grid, general lighting, air conditioning distribution to an open plan. This is the quietest of the three and often the best value per dirham he spends, because he is buying at building scale with contractors already on site and you are not paying a main contractor's preliminaries on the same scope.

Ask which one is on the table before you argue about the size of it. A landlord offering "a contribution of six months" is offering rent-free. A landlord offering "a contribution toward your fit-out" may mean either, and the schedule decides.

Nobody publishes a going rate for this, and the numbers that circulate are one source deep

A figure does the rounds for Dubai of AED 150 to 400 per square foot of landlord contribution for anchor tenants on five to ten year terms. We traced it to a single source with no published method behind it. We are not going to repeat it as a market rate, and neither should the agent quoting it to you.

Here is what the figure actually tracks, in roughly the order it moves:

So price your own ask instead of borrowing someone's rate. The method that works takes a week and costs nothing.

Get the works priced first, properly, before you sit down to negotiate. Then split that priced scope into two lists: the part that stays in the building when you leave, and the part that walks out with you. Air conditioning distribution, the ceiling, raised floor, sprinklers and detection, base lighting, a new distribution board, a glazed shopfront, an F&B kitchen exhaust riser. All of that is the landlord's asset the day after your lease ends. Your branding, bespoke joinery, AV and specialist equipment are not.

Ask the landlord to fund the first list. That is the only argument that moves an asset manager, because you are not asking for a discount. You are asking him to bring forward capital expenditure he will have to spend anyway on the next tenant, and to do it while a signed lease is on the table.

• Term. A ten year commitment buys a different conversation from a three year one. Landlords amortise what they give you across the term, and a short lease gives them nothing to amortise against.
• How long the unit has been empty. A floor that has sat dark for fourteen months is a leasing team's problem, and problems have budgets.
• Your covenant. An established company with audited accounts and a parent guarantee is a different risk from a free zone licence issued last quarter. This moves the number more than most tenants expect.
• Cheque count. Fewer cheques, or one cheque, is cash in the landlord's hand now. It is a legitimate trade for months or for money.
• Whether your layout survives you. A reusable open plan with standard meeting rooms is an asset the landlord keeps. A clinic with lead-lined walls and a medical gas plant is a removal cost he inherits.
• Whether you fill a leasing story. A recognisable name on a half-empty floor plate is worth paying for, and both sides know it.

What three months rent-free is actually worth against your build

Numbers make this argument better than adjectives, so take a 3,000 square foot office. Use your own rent, but say AED 110 per square foot a year, and price the fit-out at AED 350 per square foot, which sits inside the AED 300 to 550 band published Dubai guides use for standard commercial specification.

Annual rent is AED 330,000, so a month is AED 27,500. The build is AED 1,050,000.

Three months rent-free is AED 82,500. Against that build it is under eight per cent. Six months is AED 165,000, under sixteen per cent. A cash contribution of AED 100 per square foot is AED 300,000, which covers a little over a quarter of the build.

Now look at the same three numbers from the other side of the table, because that is what decides the negotiation. Over a five year term you will pay AED 1,650,000 in rent. The three months you asked for is five per cent of that, spread across sixty months of his revenue line. The AED 300,000 contribution is close to eleven months of rent, paid out of his capital budget, this financial year, before you have paid him anything. The two offers are not close in his accounts even when they feel similar in yours.

That is the whole reason rent-free is easy and cash is hard. It is also the reason the useful move is to ask for both and let him choose. Put the cash number in writing with a rent-free alternative beside it, converted into months. A landlord who will not approve AED 300,000 of capex will sometimes sign nine months without a second meeting, and nine months on these numbers is AED 247,500.

One timing trap sits underneath all of it. Rent-free almost always runs from lease commencement, not from permit approval. Authority submission and landlord design review sit at the front of a fit-out programme and do not compress when you add labour. An office build runs from around eight weeks for a small suite with a clean approval to twenty weeks or more for a full floor plate in an occupied tower. A three month rent-free against that programme is spent on stamps. If you can get the rent-free to run from permit issue, that single sentence is worth more than another month.

Which landlords pay cash, and which pay in months

Who you are leasing from predicts the shape of the deal better than the building does.

Institutional landlords and master developers run leasing to a template. They have an asset management team, a standard lease, a capital expenditure approval process and a target net effective rent for the building. Cash contributions exist in that world, they are approved against a model, and they are paid against certified valuations with the landlord's consultant signing the certificate. Expect structure, expect slow, and expect the contribution to be conditional.

Free zone authorities that own their own stock sit in the same bracket with an extra layer: their fit-out rules and their landlord consent are administered by the same organisation, so the contribution, the approval route and the deposit all live in one process. In JLT that means DMCC, with third party liability cover starting at AED 5 million on submission and a refundable fit-out deposit in the region of AED 2,000 to AED 10,000 released after the Certificate of Completion. DIFC runs its own building code and its own review. Internet City and d3 fall under the Dubai Development Authority, mainland towers under Dubai Municipality, the Palm and Jebel Ali under Trakhees.

Single private owners behave differently. The money is theirs personally, so cash is rare and months are plentiful, and the negotiation is a conversation rather than a model. The upside is speed and flexibility. The downside is that promises made in that conversation have a habit of never reaching the document.

Mall landlords have a fourth lever that office landlords do not: turnover rent. If you are taking retail or F&B space, a landlord will sometimes fund more of the build in exchange for a higher turnover percentage. That is a real trade, and it is worth modelling against your forecast before you accept it, because it converts a one-off capital gift into a share of every year you trade well.

Where this belongs: the lease schedule, not a side letter

Put the contribution in the lease, in a numbered schedule, with the rest of the commercial terms. Not in an email from the leasing agent. Not in a side letter signed by somebody whose authority nobody checked. Not in a term sheet that the lease then supersedes. Leasing teams change, buildings get sold, and the only document that reliably survives both is the one the tenancy registration is built on. Register the tenancy contract on Ejari, which costs AED 177.75 online and takes the terms out of the realm of memory.

The schedule has to say, in plain words:

And the question that decides everything above: if the fit-out costs more than the contribution, the overspend is yours. There is no mechanism that makes it otherwise. A capped contribution is the landlord's exposure, not a share of your risk, which is exactly why the build has to be priced from a real scope before the lease is signed rather than after.

• The amount, and whether it is a cap or a commitment. "Up to AED 300,000" and "AED 300,000" are different clauses. Almost every contribution is a cap.
• When it is paid. Against certified interim valuations as the works proceed is the version you want. Payment on practical completion means you fund the entire build and get reimbursed. Payment on opening for trade means you fund the build, the snagging period and the fit-out of your own cash flow before you see a dirham.
• Who certifies. Usually the landlord's consultant. Agree the valuation cycle and the certification period in the same sentence, or you will discover a sixty day payment term after the works are finished.
• What happens to an unspent balance. Most leases let it lapse. Ask whether the unspent portion converts to rent credit. Sometimes it does.
• What the payment is conditional on. No default under the lease, completion by a stated date, closure of the permit with a Certificate of Completion, submission of your as-built drawings. Miss the opening date and some clauses let the landlord withhold the lot.
• VAT. Contractor invoices carry VAT at five per cent on the works. Whether the contribution itself is treated as consideration for a supply is a question for your tax adviser, not your contractor, and it needs answering before signature rather than after. What the schedule must state either way is whether the contribution figure is inclusive or exclusive of VAT. Five per cent of AED 300,000 is AED 15,000, and tenants find that out at the first valuation.

Category A, Category B, MEP: who pays for which half

The clean version is that Category A is the landlord's base office and Category B is your business made physical. In practice the argument never happens at either end of that line. It happens in the middle, where your layout forces a change to the building rather than to the décor.

The useful test is whether the item changes the building's capacity or only its appearance. Additional electrical load that goes to DEWA, an upgraded chilled water allocation, a new fresh air handling unit, a dedicated kitchen exhaust riser for an F&B unit, a medical gas plant for a clinic, a grease interceptor, an acoustic upgrade to a party wall. Those stay in the building and raise what the next tenant can do with it. Push them to the landlord and make the argument in those terms. He is not being generous, he is improving his own asset at your prompting.

Conversely, the MEP work your partitions generate is yours, and it is larger than tenants plan for. Every enclosed room needs its own sprinkler coverage, detection, emergency lighting, supply and return air, small power and a data drop, all coordinated in a ceiling void that already contains someone else's services. On a clean Category A floor the mechanical, electrical and plumbing package tends to sit at twenty to thirty per cent of the budget. On a refit where the ceiling comes down, we routinely see it take forty to fifty-five per cent. A contribution negotiated against a layout drawn before that coordination exists is a contribution negotiated against the wrong number.

The clause that can hand the contribution straight back

Reinstatement is where contributions quietly reverse. A landlord funds your Category B works, the lease separately obliges you to return the unit in its handover condition, and five years later you pay to demolish partitions somebody else paid to build. The money went out and came back, slightly reduced.

Nothing about a contribution exempts the funded works from a make good obligation unless the lease says so. Carve the landlord-funded elements out of the reinstatement clause in writing, at lease stage, by name, and keep the signed handover condition record with dated photographs so the exit baseline is a document rather than an argument. The full mechanics of exit scope, notice periods and how landlords price make good sit in office reinstatement in Dubai.

While you are in that part of the lease, check whether the landlord has an option to require reinstatement or to keep your fit-out. If he can elect to keep it, a layout designed to be reusable is a negotiating asset at both ends of the term.

How to justify the ask so it survives an approval committee

Asking well is mostly about handing the landlord's leasing manager a paper he can forward upward without rewriting it.

Bring a priced bill of quantities from a contractor who has surveyed the unit, not a budget estimate from a brochure. A BOQ with measured quantities, named specifications and a written exclusions list reads as a real cost to an asset manager, because it is the same document his own project team produces. It also protects you from the second half of the trap, which is agreeing a contribution against a number you invented and then discovering the build is forty per cent larger.

Bring the split list described earlier, with the landlord-asset items totalled separately. Bring a programme showing when you can open, because a landlord's model cares about the date the rent starts more than almost anything else. Bring your covenant, unprompted: audited accounts, the parent company, the term you will commit to, the cheque count you can live with. And ask early, before heads of terms are signed, because once the commercial terms are agreed the leasing team has no reason to reopen them and no mandate to.

If you want the priced scope that makes the argument, request a fit-out estimate with the lease drawing, the building name and the draft schedule. We survey the unit, read the building's fit-out manual, check what is genuinely in the ceiling and price the works, then mark up which lines are arguably the landlord's. A drawing or just the address, sent to +971 56 508 0888, is enough to start.