The real estate market in Dubai and Abu Dhabi has recorded strong levels of activity in the first quarter of 2024. In Dubai, there was an increase in new rental registrations, with the total number reaching 46,850, a 35.8 per cent increase from the previous year. This growth was largely driven by 51.1 per cent increase in new rental registrations. Renewed contracts also saw a 6.1 per cent growth. The occupier market continues to attract global corporates despite the lack of supply, with free zone locations capturing a substantial share of market activity. Developers are fast-tracking future developments to meet the rising demand.
Demand in Dubai’s occupier market comes from a broad range of sectors, with the financial services sector being a notable source of demand. In Abu Dhabi, there were 10,475 rental contracts registered, marking a 9.1 per cent year-on-year growth. The primary source of occupational demand in Abu Dhabi comes from entities with direct and indirect government links. However, the limited availability of quality stock remains a challenge, leading some entities to consider build-to-suit options in core CBD locations.
Taimur Khan, head of Research Mena in Dubai, stated that robust levels of demand continued to be seen in the UAE’s occupier market in the first quarter of the year. Despite the expected resolute demand in the upcoming period, the availability of quality assets may hinder market activity. The limited number of developments in the pipeline in both Abu Dhabi and Dubai is expected to support strong performance across all market segments. High-quality assets, particularly Prime and Grade A stock, are expected to outperform the market due to growing demand and limited supply.
In Dubai, the average occupancy rate in the first quarter of 2024 reached 91.3 per cent, up from 90.1 per cent the previous year. This increase in occupancy levels, combined with the scarcity of quality stock, supports growth in rental rates. Average rental rates for Prime, Grade A, Grade B, and Grade C properties increased year-on-year. In Abu Dhabi, the average occupancy rate for institutional-grade buildings reached 94 per cent, up from 92.5 per cent the previous year, supporting growth in rental rates for Prime, Grade A, and Grade B properties.
Overall, the real estate market in both Dubai and Abu Dhabi continues to attract demand from various sectors, with a focus on high-quality assets. The limited availability of quality stock is expected to support rental rate growth in both cities. Developers are working to meet the rising demand by fast-tracking future developments across different locations. Despite the challenges faced, the market is expected to remain strong, with high-quality assets likely to outperform due to the flight-to-quality trend and limited supply.
