A recent report by real estate consulting firm JLL highlighted that the UAE economy has demonstrated resilience in the face of challenging global economic conditions.
The report highlights the strong growth of the country’s real estate sector across all major asset classes in 2023. The report also acknowledges that the market expansion is due to new market entrants as well as existing companies expanding their operations within the UAE, particularly in the sector of office spaces. In response to the growing demand, commercial real estate developers are launching new projects.
Some free zones in the UAE have taken proactive measures to expand their scope or initiate new projects within their regions. In Dubai, the delivery of approximately 92,000 square meters (sq. m) of office spaces, primarily Grade A specifications, brought the total market stock to 9.2 million sq. m. An additional 44,000 sq. m is scheduled to be added this year. Meanwhile, in Abu Dhabi, the total stock remained unchanged at 3.9 million sq. m in 2023, but approximately 112,000 sq. m of new office space is expected to be introduced in 2024.
In the fourth quarter of 2023, average Grade A rents in Dubai’s Central Business District (CBD) increased by 15 percent year-on-year, reaching AED 2,425 per sq. m per annum. This set a new market record, surpassing the previous high in 2016 by nearly 6 percent. Additionally, leasing activity in the CBD led to a reduction in office vacancies to 8 percent.
Faraz Ahmed, research director at JLL MENA, commented on the report titled “JLL’s ‘A Year in Review’ UAE report,” stating that the UAE’s real estate industry performed exceptionally well in 2023, particularly in the office and residential sectors. The increased demand led to a substantial increase in available properties. With the government’s focus on strengthening and diversifying the economy, real estate will continue to be a key driver of growth due to the favorable investment climate and robust demand in the country.
In Abu Dhabi, the strong demand continued to drive a 12 percent year-on-year growth in average city-wide Grade A rents, amounting to AED 2,000 per sq. m per annum. During the same period, the city-wide vacancy rate slightly decreased to 22 percent in the capital.
The report also highlights that the market remains favorable for landlords due to high rents, limited availability of quality space, and increased inquiries from occupiers. As a result, tenants are compelled to reassess their requirements and explore secondary and tertiary areas that may offer lower-quality properties.
