Dubai’s real estate sector remains healthy as off-plan property sales and thriving hospitality sector drives growth
Dubai’s Booming Off-Plan Property Market Fuels Residential Price Growth
Dubai’s thriving off-plan property sector played a significant role in driving up residential prices by nearly 18% between October and December, as per the Q4 2024 review by CBRE Middle East, a leading commercial real estate specialist.
A thorough analysis of Dubai’s real estate landscape—including residential, commercial, hospitality, retail, and industrial sectors—indicates strong market performance in the final quarter of the year.
Dubai’s Residential Market Shows Strong Growth
The city’s residential property sector delivered impressive results in Q4 2024, with average prices increasing by approximately 18% compared to the previous year.
An in-depth review reveals that apartment prices surged by 18%, while villa prices climbed by 20%. This led to average values reaching AED1,647 ($448.5) per square foot for apartments and AED2,024 ($551) per square foot for villas.
Additionally, rental contract registrations saw a 7% year-on-year rise compared to Q4 2023. This growth was mainly supported by a 9% increase in lease renewals and a 5% uptick in new registrations.
Although many tenants still prefer renewing their leases to avoid the higher costs of new agreements, this trend is gradually shifting. The introduction of new developments further from the city center is providing tenants with more affordable options and larger living spaces.
Surge in Transaction Volumes and Off-Plan Sales
Transaction activity in the residential sector remained robust, largely driven by off-plan property sales.
Throughout 2024, residential unit transactions recorded a 39% increase compared to 2023. In the fourth quarter alone, off-plan sales approached AED82bn ($22.3bn), while transactions of ready properties reached AED37bn ($10.1bn).
The total residential unit sales for Q4 2024 stood at nearly AED119bn ($32.4bn), reflecting a 30% increase year-on-year.
For the entire year, residential transactions totaled approximately AED434bn ($118.2bn), demonstrating a 33% rise.
Commercial Investment Market Sees Higher Activity
Dubai’s commercial real estate sector also witnessed significant growth in transactional activity over the past year, supported by high office occupancy rates and continued rental increases.
With prime and secondary office spaces becoming increasingly scarce, leasing activity has slowed down as fewer large-scale office transactions were completed in the final quarter.
By the end of December, occupancy rates for properties tracked by CBRE had climbed to 94%, up from 92% a year earlier.
This trend is expected to continue into 2025 due to the limited supply of new office spaces and the expanding non-oil sector, which is contributing to employment growth.
Rental prices for office spaces have consistently risen throughout Q4, with average leasing rates increasing by approximately 20% compared to Q4 2023.
Dubai’s Hospitality Sector Experiences a Boost
Between January and November 2024, Dubai saw a 9% increase in international visitors compared to the same period in 2023.
Hotel performance indicators showed positive trends, with average daily rates (ADRs) rising by 2% year-on-year and revenue per available room (RevPAR) increasing by 3%.
Retail Market Sees High Occupancy and Growing Demand
Dubai’s retail real estate sector remains highly competitive, with prime retail spaces in high demand and limited supply. Many retailers are struggling to secure new locations in premium shopping destinations.
The country’s non-oil economic expansion, boosted by record-breaking tourism figures and a growing domestic population, continues to drive demand in the retail sector.
While the retail market has remained strong, an increasing number of tenants are resisting rental hikes from landlords. Many businesses are finding it challenging to justify higher lease costs due to a competitive market that relies heavily on discounts and promotions to attract customers.
Dubai’s rental market has seen consistent price growth, with demand surpassing supply. In 2024, rents increased by nearly 4%, marking a significant rise over the past three years. However, these high costs are now testing the financial limits of many tenants.
Industrial and Logistics Sector Gains Momentum
Dubai’s industrial and logistics market continues to thrive, benefiting from favorable economic conditions and strong demand.
The success of the Transport and Storage sector in H1 2024 highlights this positive momentum. The sector recorded the highest growth among non-oil industries, expanding by 8.4% year-on-year compared to the same period in 2023.
Trade activities have emerged as the largest contributor to the UAE’s non-oil GDP, accounting for 16.5%, followed by manufacturing at 15%.
Warehouse rental rates in Dubai surged by approximately 16% year-on-year in Q4 2024.
Future Trends in Dubai’s Real Estate Market
With high occupancy rates and strong rental growth across various sectors, Dubai’s real estate market is poised for further expansion.
The commercial property sector has seen a narrowing rental gap between Grade A and Grade B office spaces, with demand driving prices higher across the board.
Occupancy rates for logistics and industrial spaces have also increased, supported by a landlord-driven market. While developers are gradually addressing the supply shortage by constructing new warehouses, most of these projects are not expected to be delivered until H2 2025.
As a result, there has been a noticeable shift toward smaller space requirements, with companies opting for short-term leases to bridge supply gaps.
Government Efforts to Sustain Real Estate Growth
Matthew Green, Head of Research at CBRE MENA, noted:
“The UAE’s real estate market continues to attract increasing interest from foreign investors, driving record residential sales transactions in Dubai throughout 2024.”
He further highlighted that commercial sectors remain strong, with demand consistently outpacing supply, as evidenced by rising occupancy levels and rental rates across office, retail, and industrial properties.
To ensure the long-term stability of the market, the UAE government has introduced several regulatory changes aimed at enhancing transparency and managing growth.
Recent measures include the Dubai Smart Rental Index, which aims to improve rental market clarity, amendments to Freehold area regulations to expand the real estate market, and new Central Bank policies to moderate the off-plan property sector.
These initiatives are designed to sustain Dubai’s real estate momentum while ensuring long-term market stability and investor confidence.
