UAE real estate in retail and industrial sectors has seen significant rent increases this year, according to CBRE Middle East in the latest edition of its UAE Retail and Industrial Market Review.
Rent for retail outlets in Abu Dhabi (14.7 per cent) and Dubai (10.5 per cent) were up as demand outstripped supply in January to March.
At the same time, industrial rents in Dubai increased by 14.3 per cent, compared to Abu Dhabi’s 5.1 per cent.
Retail real estate in the UAE
Leasing activity in Abu Dhabi’s retail market experienced a slowdown during the first quarter of 2024, where the number of rental contracts registered a decline of 8.1 per cent compared to the previous year to reach a total of 7,779.
This decline has been primarily driven by a slowdown of 8.8 per cent in renewed rental registrations and a drop of 6.6 per cent in new contracts registered.
In Dubai’s retail market, a total of 23,139 rental contracts were registered in Q1 2024, up by 0.2 per cent from the year prior.
Over this period, new rental registrations increased by 1.6 per cent, whereas renewed rental registrations declined by 3.4 per cent.
Although a significant portion of demand continues to originate from the food and beverage sector, CBRE said it has seen an increase in the number of global and international retail brands looking to establish or expand in Dubai’s core locations despite the limited availability of stock and elevated occupancy levels.
The supply-and-demand imbalance in both Abu Dhabi and Dubai continues to drive rental performance, where in the year to Q1 2024, average retail rents in Abu Dhabi and Dubai rose by 14.7 per cent and 10.5 per cent, respectively.
Both in Abu Dhabi and Dubai demand remains centred toward quality assets, particularly within core locations; that being said, the lack of availability of such stock is still one of the main challenges being faced.
Industrial real estate in the UAE
Robust levels of demand continued to be seen in the UAE’s industrial market in the first quarter of 2024.
In Abu Dhabi’s industrial and logistics market, there was a 4.7 per cent increase in the total number of rental registrations compared to the previous year, with new rental contracts registered growing by 9 per cent and renewed registrations increasing by 2 per cent.
Demand continued to primarily stem from the manufacturing sector largely driven by the capital’s relative competitiveness on labour and energy costs.
In Dubai, data from the Land Department revealed that a total of 2,914 rental registrations occurred in Dubai’s industrial market over the first quarter of the year, marking a year-on-year increase of 3.2 per cent.
This growth has been supported by a 3.4 per cent increase in new rental registrations and a 3.1 per cent increase in renewed rental registrations.
The growing levels of demand have led to a notable improvement in rental performance in the industrial and logistics markets of Abu Dhabi and Dubai.
In the first quarter of 2024, average rents in the two cities have registered a year-on-year increase of 5.1 per cent and 14.3 per cent, respectively.
A number of new developments are scheduled for delivery over the remainder of the year; however, this is unlikely to exert downward pressure on rental rates.
Average rents of new institutional-grade assets are expected to continue their upward trajectory and reach record levels, unlike dated stock, which is expected to register a more subdued performance.
Taimur Khan, Head of Research MENA, said: “The strong levels of demand seen in the UAE’s retail market have resulted in a discernible lack of quality assets. Although this is expected to continue to drive rental growth, it will likely put some pressure on new market activity, particularly given the scarcity of upcoming developments.
“Within the UAE’s industrial and logistics market, additional developments are due to come online in the short to medium term; that being said, we do not expect this to negatively impact rates, with rents expected to continue to showcase strong performance. Potential activity within this segment is likely to remain subdued.
“New high-quality stock is expected to achieve historic figures, whilst the performance of older assets is anticipated to be more fragmented in comparison.”
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