Strong Demand Drives Prices, Rentals Across Sectors

The UAE's property market witnessed a robust start to 2024, fueled by investor demand, a surge in completions, and rising prices and rents across residential, hospitality, and office sectors, according to a report by JLL.

Dubai's residential market saw a significant boost with nearly 10, 000 units completed in Q1, with a further 25, 000 units expected throughout the year. This growth coincided with a 21% year-on-year increase in both sale prices and rentals for apartments. Notably, apartment rentals witnessed an even sharper rise of 22% compared to villas (14%). Despite this, villa sales prices remained strong with a 22% Y-O-Y increase.

Abu Dhabi's residential market exhibited stability with a 7% increase in sale prices and a 4% rise in rental rates. Similar to Dubai, apartments saw higher rental hikes (5%) compared to villas (9% Y-O-Y in sale prices).

Dubai's hospitality sector thrived on healthy tourism activity. New hotel openings, primarily luxury properties, added nearly 2, 000 keys to the existing stock, bringing the total to approximately 155, 000. This, coupled with a rise in visitor numbers (18% Y-O-Y), resulted in a 5% increase in average daily rates (ADR) and revenue per available room (RevPAR).

Abu Dhabi's hotel sector mirrored this growth, with strong occupancy rates (81% YTD March 2024), an 8% increase in ADR, and a significant 17% rise in RevPAR. Recognizing the importance of experience-driven offerings, hospitality operators are investing in revamping their product lines and forging partnerships with lifestyle groups to introduce new concepts and brands.

The office market, however, witnessed limited new supply in both Dubai and Abu Dhabi. Despite this, demand for office space remained high, with tenants prioritizing fitted spaces due to reduced landlord contributions towards capital expenditures. Landlords, in turn, focused on securing long-term tenants and integrating flexible space options to cater to diverse business needs. Consequently, rental rates for Grade A office space in Dubai's CBD surged by 22% Y-O-Y, while Abu Dhabi saw a 14% increase during the same period.

The retail sector witnessed a shift towards community malls and innovative concepts. With limited space available in prime malls, local and homegrown brands are focusing on smaller community centers. Additionally, established mall owners are exploring refurbishment and introducing experiential concepts to attract customers.

The industrial market displayed the strongest demand-supply imbalance. The India-UAE trade agreement and the development of new facilities like Bharat Mart bolstered Jebel Ali Free Zone's (JAFZA) position as a key trade hub. This resulted in a significant 26% increase in warehouse rents within JAFZA. Recognizing the growing need for quality industrial space, developers are actively addressing the supply shortage through strategic partnerships.

Overall, the UAE's property market displayed a positive trajectory in Q1 2024, with strong demand driving prices and rentals across various sectors. The limited supply, particularly in the industrial and office markets, suggests this trend might continue in the coming quarters.