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Dubai’s residential real estate activity continued to grow rapidly over the past year, with transactions in the emirate rising by 51% between January and November 2022, while transaction values rose by 55%.
According to JLL's "UAE 2022 in Review" report, the data show that the jump may be caused by a sharp increase in demand from foreign buyers.
In addition, the delivery of 38,000 residential units in 2022 increased the total supply in Dubai to 680,000 units, while in Abu Dhabi, the delivery of approximately 6,000 units grew the capital's housing stock to 279,000 units. In 2023, Dubai will have 41,000 units, with 6,000 planned to be completed in the capital.
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In annual terms, average home sales prices rose by 10% and 3% in Dubai and Abu Dhabi, respectively, in the 4th quarter of 2022. Although rental rates in Dubai increased by 27% over the same period, they remained unchanged in the capital.
Faraz Ahmed, Research Associate at JLL MENA, explained: "2022 has been a year of steady growth for the UAE real estate sector as it continues to grow, benefiting from the country's robust economic policies, excellent infrastructure, safe haven status and innate ability to adapt to new trends. Even segments, such as retail, which had experienced difficulties during the year, recovered significantly in the last quarter. Looking ahead, we can expect the UAE to continue to attract the attention of both regional and international investors with tempting offers in this sector."
The outstanding housing indicators once again demonstrate Dubai’s relative status as a safe haven among the prevailing geopolitical and economic challenges in the world. However, the high level of activity in the residential sector can also be partly explained by more attractive prices than in other major cities.
Against the background of increased demand, the number of projects announced by developers in 2022 has grown to 27,000 units.
Rental market
After a prolonged decline in rental rates for offices in Dubai last year, the sector saw a noticeable turnaround. The combination of favorable business conditions and a limited number of high-quality office space has led to a double-digit increase in the rental price, raising it to the level of 2015.
Class "A" rental rates in Dubai's central business district rose by 21% year-on-year in Q4 2022, averaging AED 2,100 per square meter per year. Meanwhile, Abu Dhabi’s successful rental business contributed significantly to an 8% annual increase in Class "A" rents to an average of AED 1,790 ($487) per square meter per year. Moreover, the growing demand for office space and the postponement of the construction completion have reduced the level of accessibility in both cities. In the last quarter, the share of supply in Dubai and Abu Dhabi decreased to 11% and 23%, respectively.
Last year, technology, finance, defense and other professional services were extremely popular. There is also a steady influx of new participants into the segment, which increases the aggregate demand from tenants and leads to a decrease in incentives from landlords.
Office space market
The shortage of well-managed class "A" office space forces tenants to consider less expensive buildings and locations, giving owners of class "B" assets the opportunity to take advantage of the "overflow" of demand for high-quality space through the modernization of existing premises.
Overall, in 2022, Dubai’s office space grew by 30,000 square meters to 9.1 million square meters, while the addition of about 8,000 square meters in Abu Dhabi increased the capital’s total office space to 3.9 million square meters. In 2023, nearly 100,000 square meters of office space are expected to be delivered in Dubai and over 35,000 square meters in Abu Dhabi, respectively.
Tourism revival contributed to hotel sector growth
According to the Dubai Department of Economy and Tourism (DET), 12.82 million people visited the emirate between January and November 2022. Although this is 15% lower the pre-pandemic level, it is a significant increase compared to the same period in 2021 (6.02 million).
After selling about 6,800 units in 2022, Dubai's hotel stock has grown to 148,000, with most of the 4- and 5-star properties, and another 600 units have increased the total number of hotels and apartments in the capital to more than 32,000 units. Dubai plans to add about 13,000 keys in the coming year, while Abu Dhabi expects an additional 400 units.
Dubai’s hotel occupancy rate rose to 72% in January-November 2022, which is significantly better than last year (63%). At the same time, the average daily rate for the city (ADR) increased by 22% year-on-year to $184. Meanwhile, Abu Dhabi’s occupancy rate rose to 69% in the first 11 months of last year (compared to 66% in 2021), and ADR jumped by 29% to $119.
Several hotels in Dubai and Abu Dhabi reported full occupancy by the end of last year, as demand soared ahead of the Formula 1 competition in the UAE capital and the World Cup in Doha.
Retail sector
The steady growth of online shopping has prompted retailers to strengthen their digital presence to further increase revenue in an increasingly competitive environment. Although market participants noted tangled supply chains and inflationary pressures as key obstacles last year, there were signs of easing in the second half of the year.
The commissioning of about 200,000 square meters of retail space in 2022 increased the total volume of retail space in Dubai to 4.63 million square meters. In 2023, about 355,000 square meters of space are planned to be put into operation throughout the city – a new super-regional shopping center and the expansion of two shopping centers of the same category will make up a significant part of this. However, retail sales in the capital remained unchanged at 2.89 million square meters in 2022, but it is expected to increase by 232,000 square meters this year.
After a downward trend in recent years, rents have stabilized in both cities. In Q4, the average rental price in Abu Dhabi’s main and secondary shopping malls remained unchanged from that of 2021, while rental rates in Dubai declined by 1%.
However, it is important to note that well-located super-regional shopping malls have benefited from the return of tourists, which has led to an increase in rents in the area. Dubai’s average rent for super-regional shopping malls rose by 3% year-on-year in the last quarter of 2022 compared to Q4 2021.
In general, to differentiate their offers, franchise owners and operators are focused on creating unique entertainment concepts that contribute to the growth of popularity. Moreover, landlords offer favorable rental conditions and incentives to attract new international brands, especially in the F&B segment.
