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30,000+ residential units to be delivered in Dubai and Abu Dhabi by year-end

According to JLL, in Q1 2024, around 10,000 units were delivered in Dubai and 1,600 in Abu Dhabi demonstrating strong growth in the UAE’s residential sector

30,000+ residential units to be delivered in Dubai and Abu Dhabi by year-end

According to JLL’s ‘UAE Real Estate Market Overview’ for Q1 2024, the residential market in Dubai saw a strong start to the year, with 10,000 units completed in the first quarter, raising the total stock to 729,000 units. An additional 25,000 units are scheduled for delivery in the next nine months, mainly consisting of apartments in popular areas like MBR City, Business Bay, Jumeirah Village, and Dubai Land.

“Due to rising land prices and construction costs, developers are moving their focus to secondary locations, introducing new products with lifestyle amenities and value-added services to attract investors. To entice buyers, attractive payment options are increasing in popularity. With changes to the golden visa requirements in the UAE, developers are expected to target properties priced around AED 2 million, making it easier for buyers to qualify for the visa,” explains Faraz Ahmed, Research Director at JLL MENA.

In Dubai, both sale prices and rentals saw significant annual increases of around 21%. Apartment rentals saw the highest surge at 22%, surpassing villa rentals, which grew at a rate of 14%. Demand for villas remained strong, with a notable 22% increase in sale prices.

In Q1 2024, Dubai saw a significant increase in both the value and volume of residential sales transactions, with a 16% increase in value and a 20% increase in volume compared to the previous year.

On the other hand, in Abu Dhabi, 1,600 units were delivered in Q1 2024, adding to a total stock of 286,000 units, with an expected 6,000 more residential units by the end of the year. Sale prices increased by 7% on average, while rental rates rose by 4% during the same period. Moreover, apartments in Abu Dhabi saw a higher rental hike of 5% compared to villas. However, villas in Abu Dhabi recorded a 9% growth in sale prices year-on-year, outperforming apartments.

Also, Abu Dhabi experienced a slight decrease of 1% in the value of transactions but saw a 17% increase in volume, with more apartment transactions than villas and townhouses compared to the previous year.

Q1 2024: A strong period for the office sector

The office market in Dubai added 17,000 square metres of new office space in the first quarter, totalling over 9.2 million square metres. An additional 38,000 square metres of space is expected to be delivered later in the year, with limited supply projected for 2024. Expansion plans of existing free zones and commercial developments are anticipated to ease supply constraints in the long term. In Abu Dhabi, supply remained steady at 3.94 million square metres and an extra 79,000 square metres is set for delivery in 2024.

“Demand for office space remained strong in the first quarter, with notable activity from corporate occupiers showing a preference for fitted space. Tenants faced challenges securing favourable lease terms due to landlords reducing contributions to capital expenditures. Some tenants were able to negotiate amortisation of CAPEX into their rental agreements. Limited availability, high rents, and intense competition, especially within the Central Business District, contributed to the difficulty in securing favourable lease terms,” adds Ahmed.

He continues, “From a landlord’s standpoint, the current strategy involves prioritising long-term occupancy and employing a selective approach when signing tenants. Assessing their value-add to the building and compatibility within the existing tenant mix were key considerations. Moreover, landlords have recognised the advantages of integrating flexible space components into their developments to accommodate a diverse range of office needs. This is particularly beneficial for new market entrants with small office space requirements that may subsequently expand.”

In Q1 2024, rental rates in both Dubai and Abu Dhabi’s office markets saw a significant increase. The average Grade A rent in Dubai’s CBD rose by 22% year-on-year to AED 2,600 per square metre per annum, leading to a decrease in office vacancies from 11% to 8%. In Abu Dhabi, Grade A rents also went up by 14% to AED 2,045 per square metre per annum, with the city-wide vacancy rate standing at 22%.