The UAE’s recovery from the Covid-19 pandemic continued at an accelerated pace in 2022, with the year seeing a resurgence in travel, hospitality, and real estate demand, according to global real estate advisor Savills, who released its latest research report analysing UAE’s real estate market performance, with a review of 2022 and an outlook for 2023. The report provides a comprehensive snapshot of the residential, office and industrial sectors in Abu Dhabi, Dubai and Sharjah.

The UAE’s encouraging performance comes against the backdrop of global economic uncertainties, the prime of which have been inflation, rising interest rates, and therefore,stalling economic growth. On its part, the UAE has powered on with favourable economic policies that encourage long-term residency, ease of business setups, and increasing opportunities for job seekers. A robust and growing residential market, upgraded infrastructure, and easing social rules for residents are further boosting the appeal of the emirates among the international population. 

Swapnil Pillai, Associate Director, Research, Savills Middle East said, “There is definitely momentum in the property market across UAE, albeit the performance is likely to vary between sectors and pockets of the emirates. We are not entirely immune to the triad of global economic factors namely interest rate increases, recession fears and labour market concerns, however, we have many underlying domestic factors that can insulate our economy in 2023.”

Residential market highlights

Abu Dhabi

The residential sector has benefitted from a steady increase in the number of regional as well as global companies expanding their office footprint across the city. Residential transaction activity remained strong throughout 2022 with demand concentrated across locations such as Yas Island and Saadiyat Island. Similarly, leasing activity remained stable across the city, however, the bulk of inquiry levels were observed from tenants moving to better-quality units. Rental and price appreciation in certain areas outperformed the others, for example, in Saadiyat Island, rental values for apartments and villas climbed over 30% during 2022.

Dubai

Dubai experienced a record-breaking year in terms of transactions, helped by robust demand. Transaction activity increased by 66% from 2021, setting new records in terms of deal volumes. A total of 92,000 units were transacted across the city, the highest number in its recorded history. Off-plan projects commanded the larger share of transactions among villas and townhouses whilst demand was observed across both off-plan and ready properties for apartments

Sharjah

Demand for residential real estate remained strong across Sharjah in 2022, helped by the demand from a large expatriate population that works in neighbouring emirates but prefers to stay in the emirate due to the relatively affordable rental values and established social infrastructure. Along with the strong demand for rental properties, there has been a steady increase in demand for freehold properties especially villa and townhouse developments across the E611 post the launch of Masaar, Al Mamsha, and other developments. The high-end segment of the market has seen robust demand and occupancy levels are estimated to be more than 90%. There is a significant amount of residential supply that is expected to be handed over in 2023 and beyond.

Office market highlights

Abu Dhabi

Demand for office real estate remained buoyant across Abu Dhabi throughout 2022, led by activity from new market entrants, especially from the financial services sector across the free zone micro market of ADGM.  Consolidation and M&A activity within government and semi-government entities across the emirates and companies from the oil & gas sector were among the other key occupiers of office space across the city. During the year, various small and medium-sized office transactions were recorded across the emirate, resulting in high occupancy across various Grade A assets.. However, new supply addition remains limited, which is likely to drive prices upwards.

Dubai

The UAE’s economic landscape and positive outlook was a catalyst for increased office leasing activity in 2022. Despite global headwinds, corporates in the city continued to consolidate their operations across Grade A assets, the supply of which is dwindling. In terms of occupier demand, companies from the banking and financial services space, law firms and consulting companies have been at the forefront of leasing space across the city.In terms of occupier demand, companies from the banking and financial services space, law firms and consulting companies have been at the forefront of leasing space across the city.

Sharjah

Leasing activity was largely concentrated across the established and prime areas of the city. Despite stable transaction activity, vacancy levels remained high and averaged around 40-50% across Grade A developments, which has led to flat rental levels across assets. Enquiry levels did however see a noticeable increase towards the end of 2022, which is likely to improve occupancy levels across office developments throughout 2023. Healthy demand for offices within mixed use developments is gradually resulting in the rise of a growing number of projects in Sharjah that offer a range of uses.

Industrial market highlights

Abu Dhabi

In line with the strong demand levels for logistics space across the country, demand for industrial and warehousing space remained upbeat across Abu Dhabi during 2022. Occupier activity was strong across KIZAD and ICAD – amid healthy demand, rental values increased by almost 17% y-o-y across KIZAD, whilst they grew by an average 10% y-o-y across ICAD 1 and 2. During the current review period, numerous small and medium-sized transactions were recorded across KIZAD from companies related to the F&B industry. Companies from the oil & gas sector, 3PL players, and e-commerce companies were among the other key occupiers of the logistics space across the emirate.

Dubai

Industrial and logistics facilities continued their strong demand trajectory experienced during the pandemic outbreak with 2022 witnessing consistent growth in occupancy levels as well as an increase in rates. During the first half of the year, demand was driven by companies related to the oil & gas industry, as a result of the boost in energy prices. The other leading demand generators were e-commerce and 3PL (third-party logistics) companies amid a strengthening e-commerce market  which is anticipated to surpass AED 29 bn by 2025.

Sharjah

Sharjah’s industrial sector had a positive 2022 as demand from small to medium sized industrial operators increased throughout the year. Activity across the erstwhile areas of Sharjah, from Industrial Area 2 to 18, saw the greatest levels of interest, with occupancy levels improving and in certain areas, rents increasing by up to 10%. Demand across the established industrial areas was observed from retail, e-commerce players, and other 3PL players that need to be in proximity to the established residential locations of the city.

To read the full report, click HERE