What is the Service Charge?

The Service Charge in UAE real estate is a mandatory annual or periodic fee covering the operation, management, and maintenance of common areas in business centres and commercial complexes. It is paid by the owner or the tenant (depending on the contract) and includes the servicing of engineering systems, security, cleaning, building management, and infrastructure. Without the Service Charge, it would be impossible to maintain office towers, retail spaces, and commercial properties at the standard required by the DLD and RERA.

Unlike the rental rate, the Service Charge does not reflect the "cost of space" but rather the price of maintaining the business centre: elevators, ventilation, air conditioning, lighting, facades, parking, and building services. For tenants, it is crucial to clarify upfront whether the Service Charge is included in the quoted rental rate – in commercial properties, this is less common than in residential ones.

What Does the Service Charge Cover?

For commercial real estate, the scope of services is significantly broader than in residential projects. It typically includes:

• Maintenance of MEP systems (Mechanical, Electrical, Plumbing) – elevators, air conditioning, ventilation.
• FM services (facility management) – round-the-clock building operation, dispatch, and emergency services.
• Security, access control, and CCTV surveillance.
• Cleaning of common areas, facades, lobbies, and sanitary facilities.
• Parking management, maintenance of barriers and control systems.
• Fire safety, annual inspections, and alarm systems.
• The work of the property management company.

How Much is the Service Charge in Commercial Projects?

Service Charge rates for commercial buildings are higher than for residential ones due to the complexity of engineering systems, technical maintenance, and 24/7 operation.

Based on data from open market sources:

• Mid-tier office buildings: approximately AED 15–25/sq. ft/year
• Grade A business centres: on average AED 20–35/sq. ft/year

Example: An office of 2,000 sq. ft. with a Service Charge of AED 25/sq. ft/year would incur an annual fee of about AED 50,000. This must be factored into the total cost of ownership or leasing.

When is the Service Charge Included in the Rent?

In Dubai's commercial real estate, the Service Charge is most often NOT included in the base rental rate.

It is typically NOT included when:

• The rent is quoted as Base Rent.
• The premises are offered in Shell & Core condition.
• It is a Grade A business centre with significant operational expenses.
• The contract follows the "Rent + Service Charge" model (a common practice for offices and retail spaces).

It may be included when:

• The property is leased as a fully fitted / serviced office.
• The business centre offers an all-inclusive model.

During negotiations with a landlord, it is essential to confirm whether the Service Charge is included in the per-square-foot rate or listed as a separate item.

FAQ – Frequently Asked Questions

Who pays the Service Charge – the owner or the tenant?
By default, the owner is responsible. However, this cost is frequently passed on to the tenant through the contract terms.

Can the Service Charge change annually?
Yes. The management company revises the budget based on operational costs. Any changes must comply with the RERA/DLD methodology.

Does the Service Charge affect the yield of investment commercial property?
Yes. High operational expenses can reduce the Net Yield, especially in older buildings.

Conclusion

• The Service Charge is a mandatory fee for building operation, covering engineering systems, FM services, security, cleaning, and infrastructure.
• Market rates vary, but for office and commercial buildings, they typically range from AED 15–35/sq. ft/year, with premium towers commanding higher fees.
• The Service Charge is most often not included in the base rent for commercial spaces, making it a critical budget consideration.
• Properly reviewing the Service Charge structure, comparing it to the DLD index, and auditing the management company can help optimize costs.
• For investors, the Service Charge directly impacts net profitability, so assessing operational expenses is an essential part of any property analysis.