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Continued High Demand Boosts UAE Commercial Real Estate in Q3

Commercial Real Estate A recent report highlights the continued strength in the UAE’s commercial real estate market during the third quarter of 2023. This resilience is driven by various factors contributing to performance in the sector.

Abu Dhabi’s Solid Occupier Market

The leasing activity within Abu Dhabi’s occupier market remained robust, with a substantial increase in the total number of rental registrations. This indicates an increase in demand and a year-on-year rise of 9.8%. While renewed registrations decreased, new rental registrations surged, and government-related entities were the primary source of this activity.

Private Sector Demand Rising: Commercial Real Estate

Private sector occupiers have shown increased demand across a range of industries, with legal and financial services experiencing notable growth in occupier activity. The average occupancy rate in high-grade buildings also improved, reaching 90.8% in Q3 2023.

Rental Performance on the Upswing: 

The rising demand has driven improved rental performance, resulting in significant increases in average rents for different property segments. The scarcity of new developments and increased demand are expected to keep rental growth relatively strong in the Prime and Grade A segments.

Robust Demand in Dubai: Commercial Real Estate

Dubai’s occupier market also experienced robust demand in Q3 2023, with a significant increase in recorded rental contracts. While supply and demand imbalances favor landlords, this trend puts additional pressure on businesses. Limited new developments and strong pre-leasing activity are likely to support the market in the coming period.

Trend Towards Fitted and Serviced Spaces

A notable trend in the market is the increasing demand for fitted and serviced spaces, providing cost-effective and flexible solutions. Occupancy rates in this segment improved significantly, reflecting strong demand and limited quality stock availability.

Retail and Industrial Markets

Leasing activity in Abu Dhabi’s retail market was relatively restrained, but the retail segment in Dubai saw more substantial growth. High demand from global and international retail brands is hampered by a lack of prime assets, driving lease rate growth in both cities.

Industrial and Logistics Sector

The industrial and logistics sector remained subdued due to a lack of available stock. Nevertheless, higher leasing rates were observed in both Abu Dhabi and Dubai, driven by a supply and demand imbalance.

Positive Contributions to GDP

The Transportation and Logistics sector notably contributed to GDP growth, attracting capital and demand for the sector. The UAE’s commercial market is expected to maintain strong performance, supported by strong levels of inbound investments.

Resilience Amidst Global Uncertainty

Despite an uncertain global economic backdrop, the UAE’s robust fiscal position and ease of doing business are expected to mitigate potential downside risks. Activity and asset performance levels are likely to continue to be strong, albeit with a moderation in the rate of growth as the year progresses.

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