2023 in Leasing: A Year of Dynamic Shifts and Growing Demand in the UAE
Al Yousuf Real Estate (ARESTA) is a core pillar of Al Yousuf Group (AYG) with both commercial and residential sector properties all over the UAE. As a result, we frequently study the real estate leasing trends of Dubai. This year, as we approach the end of 2023, we have observed that the leasing property market in the UAE has seen a dynamic shift marked by rising rents and increased demand. Here are the highlights of Dubai’s 2023 leasing trends based on the latest reports:
- Rising Rents Across Segments: The UAE witnessed an increase in average rents in various sectors. By Q2 2023, there was significant growth in Prime, Grade A, Grade B, and Grade C rents by 17.2%, 11%, 16.4%, and 30% each. The retail segment also saw substantial growth in lease rates, particularly in Dubai and Abu Dhabi, with average rents increasing by 36.8% and 16.9% in each emirate.
- Commercial Sector Growth: In Dubai’s Central Business District, average Grade A rents increased by 11% year-on-year (YoY), while office vacancy rates persisted at 10%.
- Residential Sector Shifts: As villas and townhouses have grown more expensive, demand has risen for smaller, more affordable housing. Thus, Dubai’s apartment rates in 2023 rose by 51% YoY, while villa rentals increased by 1.3% YoY.
- Future Rental Price Trends: It is anticipated that in 2024, Dubai rent costs for new contracts will continue to increase. However, a slowdown in the rate of price rise is being projected, which bodes well for tenants.
From these points, it is clear that the leasing property market in the UAE in 2023 has been defined by increasing rents across various sectors as well as robust demand. While there are signs of an upcoming decline in rental hikes, which is a good sign for tenants, the market also remains strong, buoyed by a growing economy and a shift in demand towards more affordable locations and properties.
