The retail sector in Dubai is witnessing a surge in rental rates, with commercial properties recording a steep increase in average annual rent in May this year, according to the latest market research and industry insiders.
Robust economic activities fuelled by the continued influx of new businesses and increased consumer spending in the region are driving rental costs in the emirate.
Premier retail locations such as Dubai Mall and Mall of the Emirates lead the list of commercial properties which command premium rental rates, driven by high footfall and consumer demand, the latest market analysis by Foremen Fiefdom, a Dubai-based leading real estate company, revealed.
The spike in commercial rentals follows the growth trajectory in Dubai’s residential rental market, which has seen a 25 percent jump in May 2024 to an average annual rental rate of close to $20,500 (AED 75,000) for apartments.
Rents for villas, however, have seen a relatively lower increase of 6.5 percent in recent months to reach an average of about $45,000 (AED 165,000), the data showed.
“The surge in rentals for commercial and residential properties is driven by heightened occupier demand,” Karun Luthra, Vice President – Global Operations, Foremen Fiefdom, told Arabian Business.
Dubai rental market booms amid growth
Luthra said their market research showed a major spike – 29.1 percent – in the number of rental contracts registered in the first quarter of 2024.
Industry players said this sets a new record for the highest number of contracts in a quarter.
“This trend signifies a thriving rental market that is keeping pace with the city’s dynamic growth,” a senior executive with a city-based proptech, said.
Prime areas like Dubai Marina and Business Bay – the two most sought-after Dubai neighbourhoods preferred by expats – are seeing the maximum rise in the number of rental contracts.
Significant rise in the entry of new businesses and expansion of existing businesses in the emirate and the continued influx of expat talents and job seekers are seen as major drivers of the sustained growth in Dubai’s rental – as also real estate – markets.
Dubai’s and the UAE’s economic strength and security, high ROI, and supportive government policies are luring businesses and talents from around the world.
Surging demand for off-plan properties
The Foremen Fiefdom study also revealed a rising trend of developers offering attractive payment options including extended post-handover payment plans and lower upfront costs, leading to a significant uptick in off-plan project sales in Dubai.
As of 2024, a staggering 75 percent of new off-plan projects in Dubai feature extended post-handover payment plans, a remarkable jump from 55 percent in 2021, the study said.
“This trend is making real estate investments more accessible, drawing in both local and international investors,” Luthra said.
The study showed off-plan sales transactions soaring by 28.6 percent in the first quarter of this year, compared to the same period in 2023.
‘The allure of off-plan projects in Dubai has reached unprecedented heights. These numbers underscore the growing investor preference for properties still under development, with off-plan properties now rising in demand,” The Foremen Fiefdom senior executive said.
He said this shift highlights a significant trend in the market as investors recognise the potential of these early-stage opportunities.
Affordable housing remains a challenge
The study said despite the booming market, affordable housing remains a pressing challenge.
“Developers are increasingly focusing on affordable housing projects to cater to the middle-income segment, which is crucial for the long-term sustainability of Dubai’s real estate market,” it said.
Luthra said off-plan units in the affordable housing segment are emerging as a preferred solution for both residents and investors, thanks to their competitive pricing and flexible payment options.
Industry players said strategic initiatives by the Dubai government, including investor-friendly regulations and infrastructure development, have further enhanced the market’s appeal.
With ongoing mega projects, a growing population, and a strategic vision for the future, the market is poised for continued growth, they said.
Luthra said the future of Dubai’s real estate market is bright, with substantial growth in off-plan projects, rising rental rates, and sustained economic strength.
“As the market continues to evolve, it offers a wealth of opportunities for investors and residents alike, cementing Dubai’s position as a premier global real estate hub,” he said.
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