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- A combination of strong business conditions and limited availability of prime office space led to double-digit growth in rental values, lifting them to 2015 levels
- Dubai hotel occupancy climbs to 72% in January-November 2022, while Abu Dhabi climbs to 69% in first 11 months of last year
- Delivered about 200,000 square meters.Last year’s retail space boosted Dubai’s total stock to 4.63 million sqm, with some 355,000 sqm of space scheduled to be delivered across the city in 2023
Dubai, United Arab Emirates – Despite macroeconomic volatility affecting the global real estate landscape, the UAE has seen strong momentum in the final quarter of 2022, pointing to solid growth in 2023. In the same context, Jones Lang LaSalle’s UAE 2022 Year in Review report offers a rear-view mirror view of 2022, while highlighting the year’s opportunities.
Faraz Ahmed, Research Associate, JLL MENA, “2022 is a year of continued growth for the UAE real estate sector as it continues to pick up pace while benefiting from the country’s solid economic policies, excellent infrastructure, safe haven status and innate ability to adapt to new trends. Even the retail sector Market segments that faced headwinds earlier in the year also recovered significantly in the final quarter. Looking ahead, we can expect the UAE to continue to attract the attention of regional and international investors with coveted offerings within the sector.”
Residential sector outperformed
Residential transaction activity in Dubai continued to grow strongly last year. Data from Dubai Pulse further shows that the volume of transactions in the UAE increased by 51% between January 2022 and November 2022, while the value of transactions increased by 55%. Anecdotal evidence suggests that the increase is largely attributable to a surge in demand from foreign buyers.
Furthermore, 38,000 residential units were delivered last year, bringing Dubai’s total supply to 680,000 units, while in Abu Dhabi, around 6,000 units were delivered, bringing the capital’s residential stock to 279,000 units. Dubai has a slightly higher level of scheduled completions (41,000 units) by 2023, with the capital expected to complete 6,000 units.
On an annualized basis, average residential sales prices in Dubai and Abu Dhabi rose by 10% and 3%, respectively, in the fourth quarter of 2022. While rents in Dubai rose by 27% over the same period, rents in the capital remained largely flat.
The outperformance of the residential sector once again underscores Dubai’s relative safe-haven status against the backdrop of prevailing global geopolitical and economic challenges. That said, strong residential activity can also be attributed in part to continued attractive prices compared with other major cities around the world.
Backed by increased demand, developers have announced an increase in their project pipeline to 27,000 units in 2022; these will be delivered over the next few years. However, it’s worth noting that investors and end users are often making more informed decisions and are more selective when considering which properties to buy. Hence, developers need to differentiate their products from their competitors and offer products of higher standard.
After a long period of depressed office rents in Dubai, the sector saw a marked turnaround last year
A combination of a strong business environment and limited availability of prime office space led to double-digit growth in rental values, lifting them to 2015 levels.
Grade A rents in Dubai’s CBD will increase by 21% year-on-year in Q4 2022 to reach an average of AED 2,100 psm. Per year. Meanwhile, healthy leasing activity in Abu Dhabi has largely supported an 8% annual increase in Grade A rents to an average of AED1,790 psm. Per year. Additionally, rising office demand and a lack of new completions contributed to low levels of availability in both cities. Last quarter, vacancy rates in Dubai and Abu Dhabi fell to 11% and 23%, respectively.
Technology, finance, defense and other professional services industries accounted for a large share of consulting last year. The segment has also witnessed a steady influx of new entrants, driving up total tenant demand and leading to fewer incentives offered by landlords.
Additionally, the scarcity of well-managed Grade A office space is driving occupiers to consider less expensive buildings and locations, presenting an opportunity for owners of Grade B assets to capture the demand for prime floor space by” overflow” to upgrade their existing space.
Overall, Dubai’s office space stock will increase by 30,000 sqm in 2022. Reached 9.1 million square meters. And an increase of about 8,000 square meters. In Abu Dhabi, the capital’s total stock increased to 3.9 million square meters. In 2023, nearly 100,000 square meters. of office space is expected to be delivered in Dubai, more than 35,000 square meters. respectively in Abu Dhabi.
Tourism pick-up supports hotel industry growth
According to Dubai Economy and Tourism (DET), the emirate received 12.82 million overnight visitors between January and November 2022. Compared to the same period in 2021 (6.02 million), although still 15% (approximately) below pre-pandemic levels. Furthermore, additional data from DET shows that while tourist arrivals from the top 10 source markets are generally close to pre-pandemic levels, China is the exception in the first 11 months of 2022. While this can be attributed to the country’s zero-COVID policy, the recently relaxed rules should boost the country’s future tourist numbers.
With around 6,800 keys completed in 2022, Dubai’s hotel inventory rises to 148,000, with the majority of deliveries comprising 4- and 5-star hotels, while the increase of 600 keys brings the total supply of hotel and hotel apartment keys in the capital to The volume increased to over 32,000 keys. Over the next year, an additional 13,000 keys are planned in Dubai, while Abu Dhabi expects to deliver another 400 keys.
Dubai hotel occupancy climbed to 72% in January-November 2022, a big improvement from last year (63%). Meanwhile, the city’s average daily rate (ADR) rose 22% year-over-year to $184. Meanwhile, Abu Dhabi’s occupancy rate climbed to 69% in the first 11 months of last year (up from 66% in the same period in 2021) and ADR jumped 29% to $119.
Finally, several hotels in Dubai and Abu Dhabi reported full occupancy late last year as demand soared following the Formula 1 events in the UAE capital and the FIFA World Cup in Doha.
Signs of redemption in the retail sector in the second half of 2022
The continued growth of online shopping has prompted retailers to strengthen their digital presence to further increase revenue in an increasingly competitive environment. While market participants highlighted disrupted supply chains and inflationary pressures as major headwinds last year, there were signs of easing in the second half of the year.
Delivered about 200,000 square meters. Last year’s retail floor space boosted Dubai’s total stock to 4.63 million square meters, with around 355,000 square meters of space scheduled to be delivered across the city in 2023 – a new super-regional mall and extensions to two existing malls of its kind will account for most of it. In the capital, however, retail stock was unchanged at 2.89 million sqm in 2022, but is expected to increase by 232,000 sqm this year.
After trending downwards in recent years, rents in both cities have largely stabilized. Average rents in primary and secondary malls in Abu Dhabi were flat in the fourth quarter compared to the same period in 2021, while rents in Dubai fell slightly by 1%. It is worth noting, however, that well-located super-regional malls benefit from repeat customers, leading to higher rents in this segment. Average rents in Dubai’s super-regional malls increased by 3% year-on-year in the final quarter of 2022 compared to the fourth quarter of 2021.
Overall, to differentiate their offerings, owners and franchisees remain focused on introducing unique entertainment concepts to drive foot traffic. Additionally, landlords have been offering favorable lease terms and incentives to attract new international brands, especially in the F&B segment.
About Jones Lang LaSalle
JLL (NYSE: JLL ) is a leading professional services firm focused on real estate and investment management. JLL shapes the future of real estate for a better future by using state-of-the-art technology to create valuable opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities world. JLL is a Fortune 500 company with annual revenues of $19.4 billion as of September 30, 2022, operations in more than 80 countries, and more than 102,000 employees worldwide. JLL is a brand name and registered trademark of Jones Lang LaSalle Incorporated.For more information, please visit Jones Lang LaSalle.
About JLL MEA
Across the Middle East and Africa (MEA), Jones Lang LaSalle is a market leader in real estate and hospitality services. The firm operates in 35 countries across the region and employs more than 1,450 international qualified professionals.For more information, please visit jll-mena.com.
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