Dubai – United Arab Emirates – 1st May 2025 – CBRE Middle East, the global leader in commercial real estate services and investments, released its latest edition of the UAE Real Estate Market Review for the first quarter of 2025, highlighting a resilient performance of the UAE’s real estate market despite global economic uncertainties.
The analysis reflects the impact of ongoing trade tensions and declining oil prices on the UAE’s economy, with the International Monetary Fund (IMF) revising its global growth forecast from 3.3% to 2.8%. Nevertheless, the UAE’s diversified economy and strong international trade relationships are expected to cushion the effects of these external challenges. Notably, UAE’s foreign trade surged to AED 3.0 trillion in 2025, marking a 15% year-on-year increase, driven by proactive efforts to diversify trade partners and enhance trade flows.
In a significant move, Dubai’s Executive Council has issued Resolution No. 11 of 2025, allowing free zone companies to operate in mainland locations with approval from the Dubai Economic Department (DET). The move supports economic growth, boosts competitiveness, and eases market entry, aligning with Dubai’s goal to double its economy to AED 32 trillion over the next decade. Free zone firms can now apply for onshore permits without losing their status, though the change excludes the Dubai International Financial Centre (DIFC).
The office market in Dubai is experiencing strong demand due to a chronic undersupply of quality space in prime locations, resulting in rising rental rates and occupancy levels. With supply remaining tight and unlikely to improve significantly until at least 2027, anticipated new deliveries in 2025 will add only about 100,000 sqm—much of which will be pre-leased before completion. Average occupancy rates have climbed to 94%, and office rental rates have surged over 20% year-on-year, creating challenges for tenants during lease renewals as landlords maintain an optimistic outlook.
In Abu Dhabi, the office market is thriving, fueled by a robust non-oil sector and government investments that have stimulated demand for commercial spaces. Average occupancy rates have reached 96%, with office rental rates increasing by approximately 13% year-on-year, while prime rents have risen nearly 15%. Lease renewals have grown by 9%, although new leases have declined due to limited availability.
Turning to Dubai’s residential market, the first quarter of 2025 showcased robust growth, with rental rates and sales values rising compared to the previous year. An active development pipeline, particularly in waterfront areas and affordable communities, has contributed to this growth, with over 25,000 new units launched. Despite the increase in launches, slower project deliveries have led to higher rental rates, averaging nearly 11% for apartments and 9% for villas. Transactional property values have also risen by over 16%, reflecting consistent quarter-on-quarter increases. While rental growth has moderated from earlier highs, it remains a pressing concern for residents facing rising living costs.
In Q1, Dubai’s residential transaction volumes surged by 23% year-on-year, with off-plan transactions increasing by 33% and ready properties up nearly 5%. The total of 43,000 transactions recorded marks one of the highest figures ever, excluding Q3 and Q4 of 2024. The total sales value reached AED 115 billion, with off-plan transactions accounting for AED 79 billion (69%) and ready properties for AED 36 billion (31%). Overall transaction values have risen by 29% year-on-year, with off-plan values increasing by nearly 35% and ready values by almost 19%. Although off-plan transactions have slowed quarterly, ready sales remain stable near record highs. The potential impact of tariffs remains uncertain, yet a weaker dollar could enhance Dubai’s residential market appeal for foreign investors, given its favorable conditions.
For the Abu Dhabi residential market, price levels have continued to rise with momentum remaining despite a slowdown in registered off-plan sales. However, there was a 10% increase in the number of ready residential unit transactions, underling the growing demand from end-users and yield focused investors.
In the hospitality market, the report indicates that the UAE’s tourism sector continues to grow positively, with rising visitor demand being recorded across the Emirates. The report highlights the growth in Dubai’s hotel market, with total visitors rising around 4% against the same quarter last year, whilst average occupancy rates softened very slightly to 82% in year-to-date March terms, and notes that Abu Dhabi saw a similar 4% increase in the total number of overnight visitors and wider improvement to hotel performance, including significant growth in hotel RevPAR.
Looking at the UAE’s retail market, the retail pipeline in Dubai remains quite limited in the short term, with around 250,000 sqm GLA expected during 2025 and 2026 combined, and that for Abu Dhabi, the figure is lower, with around 150,000 sqm expected during the same period.
Finally, the report highlights the growth in the UAE’s industrial market driven by a favorable macroeconomic environment and strong sector fundamentals that contribute to its compelling narrative. Notably, Dubai’s warehousing rents have surged by over 20% year-on-year in the first quarter compared to the same period last year. Similarly, Abu Dhabi has experienced a 14% increase in warehousing rents, primarily fueled by heightened demand in the Khalifa Economic Zones Abu Dhabi (KEZAD).
Matthew Green, Head of Research MENA comments: “Undersupply remains a key challenge for the UAE market across all real estate sectors, as reflected in the continuation of rental growth and rising occupancy rates. This has also continued to support strong price growth, with higher sales values recorded across the residential markets in Dubai and Abu Dhabi. Despite some macro-economic uncertainty from recent tariff and trade tensions, the outlook for the UAE remains very bright, supported by an increasingly diversified non-oil sector and diverse set of global trading partners.
ENDS
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