Dubai’s commercial real estate (CRE) market witnessed remarkable growth during the second quarter of 2023, contributing to the emirate’s real estate record performance. Dubai’s fast-paced economy, high return on investment, and relaxed government initiatives have contributed to enhance the demand of Dubai’s CRE market.
OFFICE
Dubai’s office market saw significant growth in Q2 2023, with 20,953 new rental registrations, a 58.5% YoY increase, and an average occupancy rate of 92.7%. Demand was driven by diverse tenants, notably from the Technology and Financial Services sectors, and boosted by corporates from the US, Europe, India, and China.
Despite strong demand, no new office space was handed over, keeping the total supply stable at 98 million sq. ft. The average rents increased substantially across categories: Prime (17.2%), Grade A (11.0%), Grade B (16.4%), and Grade C (30.0%), driven by high occupancy rates and limited quality stock.
Hybrid working trends are prompting occupiers to downsize office spaces, reallocating cost savings to improve the quality of their facilities and employee environments. With limited supply and strong pre-leasing activity, rents are expected to continue rising throughout 2023.
RETAIL
In Q2 2023, Dubai’s retail market saw a 1.3% YoY rise in rental contracts, totaling 17,463, with renewals increasing by 11.9%, per DLD data. Prime retail spaces remained in high demand despite limited availability, with footfall strongest in large malls but slightly declining in community and secondary locations.
The F&B sector and entertainment offerings continued to drive footfall. Average rents surged 38.0% YoY to AED472 per sq. ft. The period added 64,580 sq. ft. of retail space, bringing total stock to 50.5 million sq. ft. An additional 890,000 sq. ft. of retail GLA is expected in 2023, mostly from new neighborhood malls and expansions of super-regional malls.
HOSPITALITY
In H1 2023, Dubai’s tourism industry achieved a record 8.55 million international visitors, surpassing the 8.36 million in H1 2019, driven by new initiatives under the UAE 2031 Tourism Strategy. These include a 60-day tourist visa and a Five-Year Multi-Entry Visa for multinational company employees, aiming to attract 40 million visitors by 2031.
The hospitality sector outperformed pre-pandemic levels, with an average occupancy rate of 78%, 810 hotel establishments (+13.0%), and 148,689 rooms (+26.0%) compared to H1 2019. The ADR reached AED534 (+20.0%), RevPAR hit AED415 (+24.0%), and the average stay length increased to 3.9 nights (up from 3.5 nights in 2019). These results align with Dubai’s goal to become the world’s most visited destination and a key global economic hub.
INDUSTRIAL
In Q2 2023, Dubai’s industrial and logistical space saw growing demand with 2,248 rental transactions, a 3.6% YoY increase, as reported by the DLD. Demand was driven by manufacturing, logistics, e-commerce, and oil and gas sectors, with existing occupiers expanding their footprints.
Average rents rose 19.0% YoY to AED41 per sq. ft., with leasing activity concentrated in Al Quoz, Dubai Investments Park (DIP), and National Industries Park (NIP). Grade A warehousing rents grew by 14.0% in NIP, 8.6% in DIP, and 8.0% in Al Quoz, while Grade B rents rose sharply in these hubs due to limited Grade A stock.
Increased warehousing capacity and demand were notable in Jebel Ali Free Zone (JAFZA), supported by strong ties with India and China, with 500,000 sq. ft. of new space expected by 2025. Dubai South also saw rising occupancy due to its land availability and proximity to residential areas. Around 1 million sq. ft. of industrial space is under construction across JAFZA, Dubai South, DIP, and NIP, ensuring supply meets rising demand.
OUTLOOK
Dubai’s CRE market continues to thrive with substantial growth in office spaces, innovative retail properties, hotel inventory, and expanding industrial zones. The market witnessed significant interest from both investors and end- users, which indicates the international appeal and global interest in Dubai’s CRE market.
Source: https://www.ipscongress.com/blog/dubais-commercial-real-estate-cre-market