UAE real estate market positioned for robust growth in the last quarter

The UAE real estate market defied global headwinds in the third quarter of 2024, maintaining strong momentum and robust activity across all sectors, a report showed on Wednesday.

According to JLL’s latest UAE Market Dynamics report, a surge in transaction volumes in off-plan properties, which recorded a 50.3 per cent year-on-year growth in Q3, set the pace for the upward swing in Dubai’s residential market with sales transactions rising 35.6 per cent year-to-date. Abu Dhabi’s residential market saw a 44.3 per cent rise in secondary market sales in Q3, with apartment and villa prices up 8.5 per cent and 8.1 per cent year on year, respectively. High transaction volumes and an upward trajectory underscore the market’s resilience, fuelled by strong economic fundamentals.

Off-plan sales shape residential landscape

In Dubai, 7,400 units were delivered in Q3, with another 13,500 slated for Q4. Rent increases for apartments (19.1 per cent) and villas (12.5 per cent) reflect strong demand for quality accommodation in well-serviced communities. As robust demand continues to outpace supply, lease renewals rose 14.1 per cent, accounting for 62.0 per cent share of rental registrations. New supply is expected to stabilise rental rates in Q4, prompting developers to enhance existing communities and launch new master-planned developments in secondary locations.

In Abu Dhabi, apartment rents rose 9.3 per cent and villas up 3.9 per cent. However, off-plan sales declined 67.2 per cent, impacting overall transactions which fell 40.8 per cent year on year. The flight-to-quality trend is expected to drive demand for prime properties in Q4, outperforming the broader market. Limited new supply entered the market in Q3, but 3,500 units are expected in Q4.

Surging tourism numbers drives hospitality growth

Abu Dhabi’s hospitality market is enjoying robust performance, driven by surging visitor numbers as the capital’s hotels welcomed 2.4 million guests from January to May 2024, especially at key destinations like Yas and Saadiyat Islands. YTD September saw impressive growth: occupancy was up by 7.1 per cent, ADR rose 12.2 per cent to Dh527, and RevPAR went up 23.6 per cent. Government initiatives, like the Abu Dhabi Tourism Strategy 2030, and upcoming events promise continued growth in Q4.

Dubai’s hospitality market continues to trend higher, and YTD September saw a 2.7 per cent year on year RevPAR increase, driven by rising tourism. While mega-developments like Marsa Al Arab and Dubai Islands promise to redefine luxury, existing hotels are adjusting rates to maintain occupancy amidst price sensitivity. This is intensifying competition across all segments, pushing operators to elevate guest experiences and offerings. Despite global uncertainties, the sector remains dynamic and poised for continued growth.

Strong demand for quality commercial spaces

Continued demand for Prime and Grade A assets in Abu Dhabi’s occupier market drove a 10.8 per cent year on year increase in average rents in Q3 2024. Rental registrations surged 44.4 per cent, fuelled by a 65.9 per cent rise in new registrations and a 7.7 per cent increase in renewals. Limited vacancy (4.1 per cent) and growing demand from both incumbent and new market entrants are expected to boost growth in Q4 when 70,100 sq. m. of office space is added to the total stock.

Limited availability of Grade A office space in Dubai is pushing rents higher, especially within the CBD where vacancy rates dropped to 5.2 per cent. With such limited availability, occupiers are reevaluating expansions plans, and are having to renew leases. More so, Prime office rents rose by 8.3 per cent, Grade A rents by 14.7 per cent and Grade B by 15.3 per cent year on year. Renewals went up by 7.8 per cent year on year, compared to just 2.3 per cent for new leases. Dubai’s commercial market is bifurcating with local/regional companies more willing to pay premium rents than the cautious international corporates.

F&B and innovative experiences steer retail expansion

Boosted by tourism and population growth, Dubai’s retail sector saw a strong performance in Q3, setting the pace for continued growth of prime and Grade A retail space in Q4 as well. High demand for retail space in Q3 drove 14.9 per cent year on year increase in rents for super-regional malls. Demand for prime locations are fuelling lease renewals while increased competition in the F&B sector is prompting landlords to favour experienced international brands. In Q4, innovative retail experiences will cater to meet evolving consumer demands.

Strong demand and limited quality stock defined Abu Dhabi’s retail market in Q3 as F&B remained dominant, with more international brands eyeing the capital’s prime locations. This landlord-favoured market witnessed 3.8 per cent year-on-year rent increase, with community malls leading the charge at 9.0 per cent. Rental registrations increased 10.1 per cent year on year, with new registrations up 38.2 per cent. In the next quarter, around 20,100 sq. m. of GLA is expected.

Institutional-grade assets drive industrial market

Dubai’s industrial and logistics market saw buoyant Q3 leasing activity, with rental registrations up 7.9 per cent year on year and rents up 12.9 per cent YTD September. While new developments are being absorbed quickly, developers remain cautious about speculative projects. In the upcoming period, institutional-grade assets will continue to drive the market.

Abu Dhabi’s industrial and logistics market is experiencing robust demand, particularly for high-quality assets in established locations like KEZAD, which boasts 92 per cent occupancy rate. While rental registrations surged 32.9 per cent in Q3, warehouse rents increased 8.6 per cent year on year to Dh380 per sq. m. new developments are underway to address limited availability. Government initiatives such as the Abu Dhabi Industrial Strategy are attracting investment and driving further growth, with institutional-grade stock leading the way.

Taimur Khan, Head of Research MEA at JLL, said: “The UAE real estate market demonstrates remarkable resilience, achieving robust growth across all sectors despite a challenging global outlook. Investor confidence remains strong in both Dubai and Abu Dhabi, and this upward trajectory is expected to continue, driven by strategic government initiatives and the ongoing development of world-class destinations. We are seeing a clear flight-to-quality trend, with prime assets commanding premium prices. In Q4 2024 and beyond, we anticipate sustained growth with opportunities for both local and international stakeholders.”