UAE commercial real estate market to scale new heights in 2022

Good times are ahead for the UAE commercial real estate sector as experts foresee ‘multi-year highs’ in sale volumes and rental prices in 2022. Growing investor confidence, easing post-pandemic restrictions, and increase in commercial property demand are key reasons behind a potentially robust year.

The UAE’s property market is gearing up for a stronger 2022 after a post-pandemic rebound in 2021. Steady demand for A-Grade commercial properties⁽¹⁾, combined with a relatively limited supply, has resulted in rents increasing by two percent year-on-year in Dubai and five percent in Abu Dhabi. This comes on the back of a successful nationwide vaccination programme, the introduction of new labour laws and visa initiatives, the start of Expo 2020 in October last year, and overall growing investor confidence. According to a JLL report⁽²⁾, these initiatives are helping strengthen the UAE’s competitiveness and making the country a more enticing place to live and work.

What the experts say

Brokerage firm Haus & Haus forecasts a minimum of 18 months of buoyant market conditions. Savills, the global real estate services provider, believes property prices will continue to increase in 2022, but in a much more sustainable way compared to the year gone by.The commercial property market is accommodating greater flexibility, through serviced business centres and great-quality fitted offices that minimize expenditure required for shell and core units. Rents across the commercial property sector have started rising for the first time in five years. Most importantly, however, the demand is driven by both individual and institutional investors, resulting in a 132 percent increase in office sales in the first eight months of 2021.

Trends to look out for in 2022

Despite an uptick in work-from-home, businesses are now increasingly geared towards hybrid models of both online and office working. As a result, demand for CRE is tracking back to pre-pandemic levels. But there’s another reason why office properties are in high demand: the market equilibrium. Throughout 2022, as per Savills⁽³⁾, prime offices occupied by government entities and multinationals are to remain occupied while supply is rather steady. According to the same report, the demand will primarily be driven by banking, financial services, technology, and fintech. Additionally, the fast-growing e-commerce sector will continue to increase demand for good quality warehouses.

Past real estate excellence, positive future outlook

In the early 2000s, Dubai saw a major increase in the construction of commercial spaces, while the demand was rather muted. Thus, the market had an oversupply of office spaces of all types. But the UAE’s growth as a business hub in the past decade has contributed to the demand economics significantly. Along with business-friendly initiatives like the 100% foreign ownership and golden visas, the demand could soon outstrip supply, with the pandemic slowing new developments.

While the pandemic has been especially hard on the CRE space, it is safe to say that the public health crisis has also positioned the sector on a new growth trajectory — one that is more sustainable and competitive. At the same time, it is important to recognize the proactive efforts of the government in facilitating a favourable set of market conditions for CRE to thrive. With the government continuing its efforts to increase competitiveness, the entire real estate ecosystem is in line for steady growth in the next economic cycle. And, if the aforementioned numbers are anything to go by, the growth is set to be swift and steady.