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DUBAI – Activity levels in the UAE real estate sector continued to perform strongly in the third quarter despite rising global headwinds.
Looking at data from the UAE office sector, we have seen an improvement in office rents in Abu Dhabi as demand across the market has increased, with average rental growth rates for Prime, Grade A and Grade B being 1.4%, 2.9% and 2.9% respectively. 5.5% in the year ending Q3 2022, respectively. In Dubai, the total number of commercial Ejari contracts (lease contracts) registered in Q3 2022 increased by 47.6% year-on-year. As a result, average rents in all segments of the Dubai office market recorded rental growth, with Prime, Grade A, Grade B and Grade C rents increasing by 16.5%, 10.5%, 9.9% and 10.2% respectively. Given the lack of inventory and rising demand levels, we expect rental growth to remain relatively strong for the remainder of the year, with the Prime and A-grade segments of the market expected to outperform.
In the residential sector, the average property price in Abu Dhabi increased by 3.2% in the year to September 2022, with the average price of apartments increasing by 3.3% and the average price of villas by 2.7%. As of September 2022, rents in the capital’s residential market fell by an average of 0.5%, with apartment rents up 0.3% and villa rents up 1.2%. In the third quarter of 2022, transaction data in Abu Dhabi increased by 37.5% year-on-year. In the year to September 2022, Abu Dhabi has completed and delivered 3,164 new units, with a further 5,516 new units expected to be delivered during the year.
In Dubai, the average property price increased by 8.9% in the year to September 2022, with the average price of apartments increasing by 8.0% and the average price of villas by 14.3%. Average rent growth hit a record high over the same period, with average rents in Dubai up 26.6%, and average rents for apartments and villas up 26.7% and 25.5%, respectively. Dubai has completed and delivered 20,847 new units by 2022. An additional 33,756 units are expected to be completed by the end of this year, but we expect some of these completions may be delayed until 2023. Total transactions in the Dubai residential market reached 8,020 units in September 2022, an increase of 47% compared to the same period last year. In the year to September 2022, total transaction volume reached its highest level since 2009, with a total of 63,143 transactions, an increase of 56.2%. Looking ahead, we expect average house price growth to continue to moderate. However, we expect price performance in prime neighborhoods to continue to outperform the broader market.
Looking at the hospitality industry, key performance indicators (KPIs) in the UAE continue to show resilient levels of performance, although total visits remain below 2019 levels and key volumes have increased. As of September 2022, the average occupancy rate increased by 7.9 percentage points year-on-year. During the same period, ADR increased by 34.6%, so we saw a 52.0% increase in average RevPAR. As of September 2022, the UAE’s average RevPAR is now 15.7% higher than the same period in 2019. Over the remaining three months of the year, we expect a significant increase in visits to the UAE. This will be supported by the traditional start of the peak season and events such as the World Cup in Qatar and the F1 Grand Prix in Abu Dhabi, a combination that could push occupancy and rates to record levels.
In the third quarter of 2022, visits to the UAE retail sector continued to show an upward trend. As of the third quarter of 2022, retail visits to Abu Dhabi and Dubai were 18.6% and 20.4% higher than their pre-pandemic baselines, respectively. In Dubai, 6,031 new retail Ejari contracts were registered in Q3 2022, down 3.1% year-on-year, and 9,635 contracts were renewed, up 10.5% year-on-year. in Dubai. Demand from tenants is still mainly from the F&B and entertainment sectors, with licensed units still attracting most of the demand. We also saw increased demand from beach club and family entertainment center occupiers in the third quarter of 2022. In Abu Dhabi, retail activity remained subdued in the third quarter, despite the easing of COVID-19-related restrictions in the capital. Where there is new demand, we’re seeing this focus on new or repositioned destinations that offer experience-focused retail destinations. Against these backdrops, rental performance between Abu Dhabi and Dubai continues to diverge. In the year to Q3 2022, rents in Abu Dhabi remained stable, while average rents in Dubai increased by 32.5%.
The UAE’s industrial and logistics sectors continue to maintain high levels of activity, despite a lack of quality stocks hampering the market. As a result, occupiers are increasingly having to concede to landlords’ demands and timelines, with very limited incentives on offer. As inventory levels are depleted, we are starting to see some owners, mainly in free zones, start developing new industrial and warehouse inventory. Examples of upcoming and recently completed developments include Dubai Business City, JAFZA Logistics Park and Dubai South. The total number of Ejari registrations in the industry grew by 9.4% in the third quarter of 2022. Against this market backdrop, average rents in Abu Dhabi and Dubai increased by 2.6% and 11.2% respectively in the year to Q3 2022. Going forward, we expect rental growth rates to continue to increase, especially as available inventory continues to lag significantly behind demand, which we expect to see in both Abu Dhabi and Dubai.
Taimur Khan, Head of Research, Middle East and North Africa, CBRE Dubai, commented: “Despite increasing global headwinds, the UAE’s real estate market has been developing almost continuously and we continue to see strong performance and activity levels. Q3. There is no doubt that we will see weaker global macroeconomic conditions impact economic activity in the UAE. However, the UAE’s fiscal position, relaxation of business and residency regulations throughout the year, and safe-haven status are expected to dampen the magnitude of the impact. , we expect real estate activity and performance in the UAE to remain fairly resilient going forward, given the fundamentals underpinning the market.”
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About CBRE Group Limited
CBRE Group, Inc. (NYSE: CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenues). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE provides a comprehensive suite of services to a variety of clients, including facility, transaction and project management; property management; investment management; appraisals and valuations; property leasing; strategic consulting; property sales; mortgage servicing and development services.Please visit our website www.cbre.com.
Mehdi Aliut
Head of Marketing and Communications – Middle East and North Africa
CBRE | Middle East
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