Real estate market review : UAE Real Estate Market Review Q4 2022

The UAE’s real estate sectors continued to record strong activity levels in the last quarter of 2022, concluding what has been a standout year for the UAE market despite global economic headwinds and uncertainty... 

Looking at the UAE’s office sector figures, given a marked increase in demand, rental performance in Abu Dhabi’s occupier market has substantially improved, with average Prime, Grade A and Grade B rents recording growth rates of 11.8%, 8.8%, and 13.2% respectively in the year to Q4 2022. In Dubai, we have seen a significant increase in the total number of new Ejari (lease) registrations, which reached 71,325, up 71.3% from 2021. This increased level of occupier demand has meant that we have seen average occupancy rates reach 88.0% as at Q4 2022, up from 78.9% a year earlier. This increase in take-up, paired with limited stock availability, has underpinned growth in rental rates. In the year to Q4 2022, average Prime, Grade A, Grade B and Grade C office rents in Dubai increased by 25.2%, 12.1%, 14.0%, and 22.0%, respectively. Occupier activity has originated from a range of sectors during the year and Free Zones such as DIFC, DMCC and TECOM have captured a significant share of occupier, where two notable sectors of demand have been the traditional and alternative finance sectors.

In the residential sector, average property prices in Abu Dhabi increased by 1.5% in the year to December 2022, with average apartment prices rising by 0.9% and average villa prices increasing by 4.1%. In the rental market, Abu Dhabi’s average rents dropped by 1.0% on average over the same period, with apartment rents increasing by 1.3% and villa rents increasing by 0.5%. In the last quarter of 2022, Abu Dhabi’s total transaction volumes increased by 14.9% from the previous year. In 2022, 3,856 units were completed and delivered in Abu Dhabi, with 78.0% of this supply located in Al Raha Beach and Najmat Abu Dhabi. In addition, 7,924 additional units are scheduled to be completed in 2023, where 38.4% of this supply is expected to be delivered in Yas Island and Al Sowwah.

In Dubai, average property prices increased by 9.5% in the year to December 2022, where average apartment prices rose by 9.0% and average villa prices rose by 12.8%. Dubai’s residential rents reached their highest level on record in 2022 increasing by 26.9% on average, with average apartment and villa rents rising by 27.1% and 24.9% respectively in the year to December 2022. Dubai’s volume of transactions in 2022 also broke the 2009 record level of 81,182 transactions to reach a total of 90,881. This figure also sits 59.2% above the 2021 total. Throughout this period, off-plan and secondary sales increased by 76.1% and 46.5%, respectively. In the year ahead, we expect that both the average rates of price and rental growth will remain positive, however, we expect the rates to moderate and in certain more nascent communities with strong supply pipelines, to decline. On the supply front, an estimated 29,397 residential units have been delivered in Dubai in 2022, where 26.2% of this supply has been handed in Jumeirah Village Circle, Damac Hills 2, and Dubai Hills Estate. An additional 70,957 units are anticipated to be delivered in 2023, with 32.4% of this upcoming supply being developed in Meydan One, Business Bay, and Downtown Dubai.

                                                                           Dubai, Residential Transactions

Looking at the hospitality sector, the total number of international visitors to Dubai totaled 12.80m in the year to date to November 2022, up 113.0% from a year earlier. Despite the strong rebound, this total still sits 14.5% below the same period in 2019. Dubai also topped WTTC’s 2022 ranking of the biggest international travelers spend in 2022, with a total estimated spending of AED 108.0 bn. This figure is expected to increase to AED 157.7 bn by 2032, a forecast increase of 46.1%, although Dubai is expected to slip to third in the rankings with Hong Kong and Macau expected to retain the first two positions, respectively. The UAE’s Key Performance Indicators (KPIs) continue to showcase resilient performance levels, despite total visitation remaining materially below 2019 levels. Year-on-year in 2022, the average occupancy rate increased by 5.4 percentage points. Over the same period, the ADR increased by 18.2%, and as a result, the average RevPAR increased by 27.8%. Average RevPARs across the UAE, in 2022, now sit 19.9% above 2019 levels.

In the retail sector, the total number of retail Ejari contracts registered in Dubai during 2022 increased by 10.6% year-on-year. Dubai continues to see a significant amount of retail demand originating from the food and beverage sector. With demand for immersive and experiential food and beverage offerings continually growing, we are seeing occupier activity from both existing occupiers expanding or offering new concepts and new market entrants. In addition to this, alongside the ever-growing number of fine dining concepts on offer, we are also seeing a resurgence in occupier demand from the casual to mid-end dining segment of the market. With many of these concepts being licensed, the recent removal of the 30% duty on alcohol will likely provide an additional boon to demand from this segment of the market. In Abu Dhabi, we have started to see leasing activity levels start to pick up during the last quarter of the year. Alongside core offerings going into existing locations on or near Downtown Abu Dhabi, we are seeing new entertainment and experience lead locations such as Saadiyat Grove attract significant occupier interest. Rental rates in both Abu Dhabi and Dubai have increased in 2022 by 5.6% and 51.5%, with average rates registering at AED 1,875 per square metre and AED 417 per square foot, respectively. In both markets, significant increases in rents in regional and super-regional malls are underpinning growth rates in headline rents.

Activity levels in the UAE’s industrial and logistics market have remained steadfast over the course of the year, with demand stemming from a broad range of sectors, including foodstuffs, manufacturing, automotive and transport and storage firms. To cater for this growing level of demand, we are seeing new development activity take place, as both institutional and private developers start to address the significant lack of quality stock in the sector. For the full year, the total number of Ejari contracts registered for the sector increased by 14.9% year-on-year. In the year to Q4 2022, average rents in Abu Dhabi and Dubai increased by 4.7% and  17.4%, respectively. More so, a number of Free Zones have also begun to increase land lease rates. Looking ahead, we expect that this may underpin further increases in rental rates. However, we do not envisage that the rate of rental growth will increase until the delivery of new developments, which are of institutional-grade quality, without which there is likely to be a ceiling on current market rents.

Taimur Khan, Head of Research – MENA at CBRE in Dubai, comments: “The UAE’s real estate market concluded a stellar year, with performance and activity levels reaching multi-year, if not historic, record highs in many sectors. Attention will now turn to the outlook for 2023, where mounting global economic headwinds were starting to potentially raise questions around if this performance could continue. Even with those risks, we had anticipated that both performance and activity levels would have remained resilient over the course of this year, albeit with growth rates expected to moderate considerably in a number of sectors. Our view on this has not changed, in fact, on the back of an improving global macroeconomic backdrop, CBRE forecasts that market performance in the UAE’s real estate sector will remain steadfast in 2023. ”


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