Dubai and Abu Dhabi’s retail rental markets witnessed a “supply-and-demand imbalance” in 1Q 2024, driving rents to increase 14.7% y-o-y in Abu Dhabi, and 10.5% y-o-y in Dubai, according to commercial real estate services firm CBRE Middle East’s retail and industrial market review (pdf).

DUBAI-

Average occupancy rates within freezone locations inched up 1.2% y-o-y to reach 91.3%. This segment’s average rents stood at AED 43 per sq-ft in 1Q 2024, marking a 14.3% y-o-y increase, CBRE said in its office market review (pdf).

In the first quarter of the year, Dubai's industrial and logistics market saw 3k rental registrations, a 3.2% y-o-y increase, according to data from the Dubai Land Department. This growth was driven by a 3.4% rise in new rental registrations and a 3.1% increase in renewals. Rents in this market segment reached AED 493 per sqft.

Dubai's retail market saw the registration of 23k rental contracts in 1Q 2024, somewhat the same as in 1Q 2023. New rental registrations rose by 1.6%, while renewed rental registrations fell by 3.4%

Dubai saw some 47k new office registrations, marking a 36% y-o-y surge, CBRE said, citing data from the Dubai Land Department. New rentals jumped 51.1% y-o-y to exceed 34.4 registrations. Renewed contracts stood at 12.4k, up 6.1% y-o-y from 1Q 2023.

The emirate’s limited rental properties could stunt market growth: “Although demand within Dubai’s retail market continues to primarily originate from the food and beverage sector, we are seeing a rising number of global and international retail brands looking to establish or expand in Dubai’s core locations despite the limited availability of quality stock and elevated occupancy levels, hampering market activity,” CBRE said.

ABU DHABI-

Office occupancy rates in Abu Dhabi increased by 9.1% y-o-y, with a total of 10.4k rental contracts. This growth was driven by a 21.2% y-o-y rise in new rental registrations, despite a 5.1% y-o-y decline in renewed contracts.

Driving demand: “The primary source of occupational demand in Abu Dhabi continues to originate from entities with direct and indirect government links, particularly in on-shore locations. That being said, the limited availability of quality stock remains one of the main challenges being faced. Given this, several entities have started considering build-to-suit options, particularly within core CBD locations, to accommodate their future expansion plans,” CBRE said.

Retail leasing fell 8.1% y-o-y in Abu Dhabi to some 7.7k rental contracts in 1Q 2024, attributed to renewed rental registrations contracting by 8.8% and a 6.6% drop in new contract registrations. On the upside, average rents increased by 14.7% to reach AED 2.1k per sqm.

The emirate saw industrial and logistics rental registrations grow 4.7% y-o-y, with new rentals climbing 9.0% and renewed contracts rising 2%. The industrial market saw a 5.1% y-o-y increase in average rents to AED 408 per sq-m.

LOOKING AHEAD-

Upwards pressure on rentals to remain, but market activity could dampen: “The strong levels of demand seen in the UAE’s retail market have resulted in a discernible lack of quality assets. Although this is expected to continue to drive rental growth, it will likely put some pressure on new market activity, particularly given the scarcity of upcoming developments,” Taimur Khan, CBRE’s head of research said.

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