Dubai and Abu Dhabi’s real estate markets saw demand for stock outweigh supply in 2Q 2024 across the office, retail, and industrial markets, while residential rents continue to see increases amid robust demand, according to commercial real estate services firm CBRE Middle East’s UAE Real Estate Market Review Q2 2024 (pdf).

THE OFFICE MARKET-

Rental growth came despite average occupancy rates for institutional-grade assets inching down 0.1% y-o-y to reach 91.4%, driven by new stock entering the market. Rentals increased the most for grade A and grade B offices, with grade A seeing rentals grow 19.9% y-o-y and grade B office rentals shooting up 20.9% y-o-y. Grade C office rentals are also up 15% y-o-y, while prime offices were up a slower 4.7% y-o-y.

Still, demand > supply: Office rental registrations in the emirate increased by 38.4% in 2Q 2024, specifically for freezone locations. “The limited availability of quality assets and growing demand levels continue to support a very much landlord-favored market,” according to the report, which noted that the scarcity of stock is leading some occupiers to look towards reducing occupied space.

Abu Dhabi’s rentals weren’t as high, with average occupancy rates for institutional-grade assets jumping to 94.7% y-o-y. Average rents for prime offices in Abu Dhabi were up 9.1% y-o-y, while grade A offices saw prices increase 7.4% y-o-y, and grade B offices saw 14.5% y-o-y increases in Abu Dhabi in 2Q 2024. The emirate’s office market also tipped in favor of landlords during the quarter, driven by a 15.9% y-o-y increase in rental registrations against limited new developments.

We could see more supply soon: Consolidation of office space by government and semi-government-related entities — which comprise the lion’s share of occupier demand in Abu Dhabi — is expected to make way for additional availability in the market in the short run, according to the report. Until that happens, the occupier market is expected to remain robust through 2H 2024, the report said.

THE RESIDENTIAL MARKET-

Average residential prices in Dubai jumped 21.3% y-o-y in 1H 2024, with apartment prices increasing by 20.7% y-o-y, and villa prices increasing by 24.3% y-o-y. Growth came alongside an inflow of over 12.2k new units delivered in the emirate in 2Q 2024. Some 40.6k units are slated for handover in 2H 2024.

On the rental front: Average residential rents increased by 21.1% y-o-y in the first six months of the year. Average apartment rents rose by 22.2%, while villa rents increased by 12.7%.

Meanwhile, in Abu Dhabi: Apartment prices rose by 6.2% y-o-y in Abu Dhabi in 2Q 2024, while villa prices increased by 3.9% y-o-y. Rentals also inflated during the same period, growing 6.6% y-o-y for apartments and 2.5% y-o-y for villas. The emirate delivered over 1.4k new residential units in 1H 2024, with another 6.8k units in its pipeline by the end of the year.

THE HOSPITALITY AND RETAIL MARKETS-

The UAE’s hospitality sector saw robust growth, with the average occupancy rate across the country increasing by 1.7% y-o-y in 1H 2024.

Revenue per available room (RevPAR) in Abu Dhabi increased 24% y-o-y in 1H 2024, on the back of a 5.8% increase in the average daily rate (ADR). Meanwhile, RevPAR in Dubai rose 4.7% y-o-y, driven by ADR increasing by a similar 4.6% y-o-y.

Retail rentals were on the up: Average retail rents increased 6% y-o-y in Dubai in 2Q 2024, and 3.6% y-o-y in neighboring Abu Dhabi, on the back of a lower supply of high-quality stock, according to the report. The Dubai Mall Expansion is expected to add some 240 luxury stores and F&B outlets to the market, in a bid to cater to rising demand.

ICYMI- CBRE said that Dubai and Abu Dhabi’s retail markets are experiencing a supply-demand imbalance in 1Q 2024, as more global brands set up shop in the emirates, making way for a more landlord-favored market.

THE INDUSTRIAL MARKET-

Dubai’s industrial and logistics market saw average rents grow 10.6% y-o-y to AED 45 per sqft in 2Q 2024, as demand outpaced supply, with the emirate logging a 2.5% y-o-y increase in total rental registrations. Depleted stock levels also edged incumbents to renew leases and commit to longer terms, according to the report, with renewed contracts increasing by 2.3% y-o-y during the period.

In Abu Dhabi, average rents climbed 5.8% y-o-y to AED 409 per sqm, despite a 4.1% y-o-y decline in total rental registrations, with supply expected to continue to lag behind soaring demand despite new stock underway in both onshore and offshore locations.

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