At the halfway point of 2025, the UAE real estate market remains anchored by the same fundamentals that have drawn capital here for years: population growth, government-led diversification, and an expanding role in global capital flows.
But behind that stability, the market is becoming more selective. Scarcity is tightening in some sectors, while others are beginning to fragment. For investors, developers, and corporates, knowing where these shifts are happening - and why - is now central to pricing risk and deploying capital effectively.
Global Volatility, Local Predictability
As developed markets wrestle with corrections, falling values, and limited rental growth, Dubai and Abu Dhabi have held course. Non-oil sectors continue to expand. Large-scale infrastructure pipelines remain funded. Population inflows remain positive. Government policy is giving capital rare forward visibility.
For many institutional investors, this combination of yield, stability, and predictability remains difficult to match elsewhere. Dubai’s relative outperformance is why sovereign funds, family offices and global managers continue to allocate here, despite already significant exposure.
Office: Scarcity Creates Pricing Power
Dubai’s office sector continues to diverge sharply from global peers. Citywide occupancy stands at 92%, with Grade A assets at 95%. Prime districts such as DIFC, One Central, Sheikh Zayed Road, and D3 remain near full occupancy. Rents have climbed to an average of AED 190 per sqft - a 22% year-on-year increase - with DIFC continuing to command the highest premiums.
While just 0.89 million sqft is expected to complete in 2025, the pipeline expands significantly in 2026 and 2027, with a combined 6.4 million sqft in the works. Encouragingly, many new projects already show strong pre-leasing, suggesting sustained appetite for high-spec, ESG-compliant stock. The key watchpoint is absorption beyond 2026.
A parallel trend is the re-emergence of commercial off-plan sales in fringe submarkets such as Arjan and Motor City. While this adds strata-based inventory for SME occupiers, it does little to address the shortage of institutionally owned, Grade A stock preferred by global tenants and capital.
In Abu Dhabi, Grade A office space remains tight, with overall office occupancy at 90% and Grade A at 97%. Asking rents now average AED 160 per sqft, up 11% year-on-year. Supply additions in H2 2025, including Masdar City Square and The Link, will add 830,000 sqft, though much of this is already pre-committed.
Demand across both markets remains driven by financial services, energy, and professional sectors. In Abu Dhabi, ADGM leads the way; in Dubai, DIFC and D3 remain standout clusters. Flexible workspace is also gaining traction, particularly among occupiers needing speed and short-term optionality.
Residential: Dubai Eases, Abu Dhabi Accelerates
In Dubai, residential price growth is clearly moderating. Q2 2025 sales prices reached AED 1,822 per sqft, a 14% annual increase but down from previous years’ highs. Rental growth has slowed to 7% year-on-year, as nearly 43,000 units are expected for delivery this year - the highest since 2019. Mid-market apartment areas are showing signs of saturation, while villa communities continue to perform.
In contrast, Abu Dhabi's residential market remains in high gear. Citywide sales prices rose 18% year-on-year, with Saadiyat Island leading at AED 4,172 per sqft (+30% YoY). Rents are also surging, up 27% across the city. Apartment segments in particular are benefiting from strong demand and limited supply. Major new launches from Aldar and Modon are seeing sell-out success, while more than 3,600 units are due on Yas Island this year.
The outlook remains segmented: Dubai is moving into a more balanced phase, while Abu Dhabi continues to be shaped by high-quality launches, population growth, and structural demand from free zone expansion and sectoral diversification.
Retail: Tenant Mix, Not Just Occupancy, Is the Differentiator
The retail sector is positioning for sustained growth through 2027, but success increasingly depends on strategic tenant curation rather than simply maintaining high occupancy rates. While average rents for regional malls remain steady, super-regional malls in prime locations like The Dubai Mall and Mall of the Emirates are commanding increases of 12–15% year-on-year.
Headline occupancy remains high at 95%+, but the real story is a strategic evolution in leasing. Landlords are selectively reshaping tenant mixes, prioritising homegrown F&B anchors and international brands that can localise effectively. Destination curation, not just leasing velocity, is emerging as the driver of long-term asset value.
Dubai’s Urban Master Plan 2040, the rise of community-based retail hubs, and growing hybrid physical-digital strategies are all reinforcing this shift. The market is also becoming more segmented between local Emirati districts and diverse expat-driven neighbourhoods, prompting landlords to tailor tenant strategy to each.
Leading operators are focused on attracting brands that can adapt locally and drive repeat visitation. Simultaneously, hybrid leasing models that balance brand recognition with cultural relevance are helping mitigate volatility in underperforming locations.
Logistics: Sustainability and Supply Constraints Reshape the Sector
The industrial sector continues to experience tight supply and double-digit rent growth, with Grade A warehouse vacancy low and demand surging across e-commerce, manufacturing, and chemicals.
Sustainability is also rising up the agenda. Operators like KEZAD are embedding flood mitigation, greywater reuse, and AI-based monitoring systems into industrial zones. These initiatives are no longer niche - they are fast becoming prerequisites for capital and corporate tenancy.
Climate resilience is increasingly priced into assets. As ESG standards mature, the performance gap between compliant and non-compliant stock will widen, with pricing power shifting to future-ready inventory.
The UAE’s ability to offer high-reliability infrastructure, multimodal access, competitive energy costs and workforce depth continues to draw manufacturers and logistics providers, even against rising rental baselines.
Data Centres: Scale, Speed, and Sovereign Support
Abu Dhabi and Dubai are now ranked first and second globally among emerging data centre markets, driven by land availability, low-cost power, and sovereign-aligned infrastructure investment. With over 750 MW in development and $3.3 billion in forecast market value by 2030, data centres are quickly becoming a core real estate allocation for global capital. The UAE’s ability to deliver power, land, and approvals at speed makes it a strategic outlier in an otherwise supply-constrained global market.
Hospitality: Structural Momentum, Not Just Post-Pandemic Recovery
Dubai recorded 8.68 million overnight visitors in the first five months of 2025 - tracking 7% above 2024 - and is on pace to hit 20.8 million full-year visitors, a 21% YoY increase. Occupancy reached 83%, average daily rates hit AED 620, and RevPAR rose 7%, underscoring strong pricing power and infrastructure utilisation.
What’s notable is the breadth and resilience of source markets. Visitors from the CIS, GCC, MENA, Western Europe, and South Asia make up 78% of total demand—shielding performance from single-market volatility. The 5% ADR growth continues to outpace inflation, reinforcing Dubai’s premium positioning.
Abu Dhabi posted 1.52 million occupied guest nights, with 87% occupancy and AED 614 average rates. Its profile includes a strong domestic travel base (nearly 20% UAE nationals) and a cultural strategy anchored by museums and cruise terminals. Average stay durations are extending, and the market has room to grow as new infrastructure comes online.
Both emirates are benefiting from long-term shifts in global mobility patterns, as well as a reallocation of leisure and business travel budgets toward the region. The fundamentals point to sustained growth, not a post-COVID rebound.
Capital Remains Engaged, But More Discerning
The UAE market continues to offer a rare combination of income stability, rental growth, and policy-driven macro visibility. But the market is no longer forgiving. Scarcity is real in certain segments, but pricing power increasingly belongs to assets that meet rising standards on quality, ESG, tenant profile and operational resilience.
For allocators, the story is less about relative stability, and more about finding correctly priced risk within a maturing, increasingly institutional landscape.
Looking Ahead
The second half of 2025 will continue to test how well capital, developers and occupiers navigate this tightening cycle. Headline stability remains, but performance will be increasingly defined by how capital allocates into the right assets — and avoids the wrong ones.
