Activity levels across the UAE’s real estate sectors are seeing a marked increase according to CBRE. Over the course of the recent past, the vast majority of activity has originated from incumbents, however we are once again beginning to see increased levels of interest from international investors. 

Looking at the UAE’s office sector figures, visitation to the workplace in Abu Dhabi appears to be edging back towards its pre-pandemic baseline. With Prime stock being relatively limited, headline Prime rents rose by 2.9% in the year to Q3 2021. However, in the Grade A and Grade B segments, we have witnessed average rents decrease by 1.5% and 2.9% respectively. In Dubai, visitation to the workplace remains 9.0% below its pre-pandemic baseline. Dubai’s office market has seen an increasing number of new entrants to the market, including several technology firms and Fintech firms, pushing the average occupancy rate to rise to 78.8% in Q3 2021 (up from 77.1% a quarter earlier). Despite this, performance in Dubai’s occupier market remains subdued, as average Prime, Grade A, Grade B and Grade C rents fell by 6.2%, 4.1%, 6.5% and 6.4% respectively in the year to Q3 2021. The UAE office market thus continues to be very much tenant favourable overall, and landlords are becoming more proactive in attracting and securing tenants, offering a range of incentives including rent-free periods. 

In the residential sector, average prices in Abu Dhabi increased by 2.2% in the year to August 2021, with average apartment prices rising by 1.9% to reach AED 10,746 per square metre and average villa prices increasing by 3.1% to reach AED 8,634 per square metre. Rents in the residential market fell by 4.7% in the 12-months to August 2021. New supply in Abu Dhabi remains limited, with only 1,853 units being delivered in the year to date. An additional 9,388 are scheduled for delivery in the remainder of 2021, however, it is very unlikely we will see this full quantum delivered.

In Dubai, preliminary estimates show that residential transaction volumes increased by 76.8% in the year to date to August 2021, while secondary market transactions rose by 120.7% and off-plan transactions by 39.0%. Overall, sales volumes in the first three quarters of 2021 have already surpassed total annual transaction volumes in all but two of the last 10 full years. With mortgage rates continuing to edge lower, we expect that growth in transaction volumes will remain relatively robust over the course of the year. Average prices in Dubai increased by 4.4% in the year to August 2021, the highest rate of growth since February 2015. Over this period, average apartment prices increased by 2.5% and average villa prices increased by 17.9%, with average apartment prices standing at AED 1,040 per square foot and average villa prices stood at AED 1,156 per square foot. Rents, on the other hand, continue to trend lower, falling on average by 2.7% in the 12 months to August 2021. This decline in average rents has been underpinned by declining apartment rents, which fell by 5.2% over the same period. In the year-to-date, new supply in Dubai has totaled 24,595 units, with an additional 24,700 units forecast to be delivered in the remainder of the year.

As travel restrictions continue to be eased globally, we are seeing a marked increase in the number of daily flights, which has led to strong improvements in the UAE’s hospitality sector. In the year-to-date to August 2021, the average occupancy rate rose 11.4 percentage points, the average ADR increased 2.3% and as a result we have seen the average RevPAR increase by 26.1%. Although the UAE’s KPIs are still materially below their 2019 levels, the relative resilience of the market is evident. Looking ahead, with the Expo 2020 event beginning, reduced restrictions on travel to the UAE and more palatable temperatures, we expect that KPIs will continue to improve over the course of 2021.

With regards to the retail sector, we have observed a marked increase in activity levels in Q3 2021, with retail activity in Abu Dhabi and Dubai standing at 1.9% and 0.3% above their respective pandemic baselines. In Dubai, we have seen a number of international and local brands looking to either enter the market or expand their current operations into new retail offerings across the city. Demand for space stems from supermarkets, pharmacies and quick service restaurant operators, with these occupiers looking to serve increasing demand levels in new retail locations. Furthermore, in both Abu Dhabi and Dubai, we are seeing increased levels of activity from licensed food and beverage operators. Overall, we continue to see a tenant favoured market operate in this segment of the market, with landlords either providing significant incentives or entering into join-venture agreements to attract recognised brands. While activity levels have increased, given the headwinds faced by the sector and upcoming supply, rents in both Abu Dhabi and Dubai remain under pressure. In the year to Q3 2021, average rents fell by 16.4% and 10.5% in Abu Dhabi and Dubai, respectively.

Taimur Khan, Head of Research – MENA at CBRE in Dubai, comments, “Market sentiment, in almost all real estate sectors in the UAE, has certainly improved over the course of the year, which has in turn underpinned activity levels. Whilst there are still headwinds which are tapering performance, we do expect price performance to begin to improve in the not too distant future.”