• Apartment project launches surged by 22% in Q1 2024, while villa launch volumes declined by 30%.
  • Off-plan transaction activity continues to dominate the market while the secondary market stabilises.
  • Record 402 residential properties sold above AED 20 million in Q1 2024, marking a 40% year-on-year increase.
  • City-wide sales prices rose for the 15th consecutive quarter while rents rose for the 13th consecutive quarter, further impacting affordability.
  • With Grade A office occupancy levels at 93%, Dubai could potentially be out of Grade A office space by Q4 2025, with pressure easing off from 2027.
  • As office demand intensifies and outstrips supply, citywide office rents spiked by 25% year-on-year.

Dubai, UAE: According to Cushman & Wakefield Core’s Q1 2024 market update, Dubai's sustained transaction volume growth and robust performance indicators in Q1 2024 reaffirm its status as a global economic hub and investment hotspot. This position is bolstered by sustained population growth, favourable visa regulations, upbeat market sentiment and a booming tourism, commercial and hospitality market.

Prathyusha Gurrapu, Head of Research & Consulting at Cushman & Wakefield Core says “While the upward trajectory continues across all performance indicators including rents, sales prices, and occupancy levels, we are starting to see the pace moderate in the residential market.” 

RESIDENTIAL MARKET

No fears of oversupply in the near future

The overall residential supply delivery figures remain in line with our forecasts with no major headwinds of oversupply in the near term. However, significant project launch volumes may impact the supply-demand equilibrium after 2 to 4 years when most of these projects are scheduled for delivery, provided they are delivered on time.  Over 8,351 units were handed over in Q1 2024 while an additional 29,690 units are expected to be handed over between Q2 to Q4 2024, bringing the yearly forecast for 2024 to nearly 38,000 units.

Apartment project launches continue to rise, while villa launches aren’t catching up

Prathyusha says “Apartment project volumes in Q1 2024 saw a 22% year-on-year increase while villa project launches saw a sharp decline of 30% during the same period. Despite the sustained demand for villas, developers remain slower to respond to this surge, largely because of limited land acquisition opportunities.”

The announcement of the new Al Maktoum International Airport is expected to further activate and bolster Dubai South, Expo Village, Expo City Dubai, and the surrounding areas for residential, commercial, hospitality and industrial asset classes – resulting in a significant push for project launches over the near to mid-term.

Stabilisation in the secondary sales market

Prathyusha says “The off-plan market saw a 22% year-on-year increase while the secondary market saw 16% rise. It is interesting to note that while transaction volumes are up, the secondary market transaction volumes have stabilized over the last three quarters indicating sustained levels of end-user demand, whereas off-plan launch volumes have shown large variances based on prominent project launches – albeit with an overall upward trajectory.”

The heavy rains of 2024 and its impact on the Dubai property market

The April 2024 rains are anticipated to have a long-term impact on infrastructure planning which is already seeing strides with the Dubai government approving many transformative infrastructure projects. The speed at which Dubai regained mobility after the record-breaking rains was truly impressive. However, communities were impacted by the rise in water levels, and how the community management challenges were handled in the aftermath are expected to affect overall decision-making in addition to location and pricing for buyers and tenants when looking at locations to buy or rent. With the government mandating all developers and community managers to conduct the cleaning and repairs for residences free of cost, it is expected to alleviate the inconvenience caused to residents. We would see this impact reflected in higher service charges and insurance premiums over the near term.

Ultra-Prime Properties: A record 402 residential properties were sold above AED 20 Million in Dubai in Q1 2024, displaying a 40% year-on-year increase. Most of the ultra-prime transactions are concentrated in Jumeirah Bay Island, Palm Jumeirah, Dubai Hills Estate and Tilal Al Ghaf.

Prathyusha says, “With growing UHNI demand for luxury properties, particularly waterfront properties and branded residences, we foresee this segment to remain strong as global wealth continues to gravitate to Dubai.”

Sales prices continue to rise for the 15th consecutive quarter

City-wide sales prices are up by 20% year-on-year and 66% higher than Q1 2020 (pre-Covid19). The majority of villa districts we track have experienced a year-on-year increase in sale prices of above 20%. One contributing factor to this surge in villa sales prices, especially in established central locations, is the trend of renovating and reselling units at notably higher prices, thereby elevating the average price in the area.

In the apartment market, while prices continue to rise, we have seen a moderation of sales price increases, particularly in the prime sub-markets including Palm Jumeirah, City Walk, Downtown Dubai and Dubai Marina, where sales price increases have moderated to sub-20% year-on-year increases. Affordable and mid-market apartment communities, owing to a lower base, have seen a sharper increase of 30% and above.

Rising rents for the 13th consecutive quarter impacting affordability levels

City-wide rents have seen a 20% year-on-year increase while being 72% higher than Q1 2020 (pre-Covid19). Household incomes aren’t increasing in line with the rising rents, further contracting disposable incomes.

The RERA calculator was recalibrated on March 1, 2024, to better align with open-market pricing and bridge the gap between renewals and new rents. Tenants might encounter higher rents during renewals, potentially prompting increased movement in the rental market as they seek relocation due to no savings achieved during renewals.

OFFICE MARKET

With occupancy at 93% on the back of record absorption, Dubai could be out of Grade A office space by Q4 2025

Robert Thomas, Head of Agency at Cushman & Wakefield Core says “With office demand continuing to outstrip supply, most handovers being pre-leased, occupancy levels are to see sustained upward pressures with Grade A office occupancy expected to be near 95% by the end of 2024 and hovering at near full by 2025 – albeit, contrary to other global markets which are at much lower office occupancy levels.”

Office Supply: No new office supply was handed over in Q1 2024. In 2024, we foresee over 1.85 million sq. ft. of gross leasing area to be handed including the next phases of Expo City Dubai, Wasl Tower, Millennium Downtown (refurbished Crowne Plaza), and the next phases of Innovation Hub and Dubai CommerCity.

Robert says “There are many major landlords and freezones activating projects now to address the growing demand. Immersive Tower in DIFC is the first of multiple developments within DIFC expected to begin construction along with DMCC and TECOM set to launch their next phases. However, no relief is expected until 2026 due to a minimum of a 2 to-3-year construction lifecycle. Furthermore, as most of the upcoming Grade A supply is highly likely to be preleased, limited substantial new supply is expected to be brought to market in the foreseeable future, deepening the supply crunch.”

ICD Brookfield Place: 49% sale strengthens Dubai’s institutional investment market.

The ICD Brookfield Place transaction paves the way for future large-scale institutional investments as more investment-grade stock is brought to market in the backdrop of high rents and occupancy levels, making it the right time to sell despite high-interest rates. Our Capital Markets team is seeing multiple off-market investment opportunities as landlords and developers look to capitalize on the all-time high regional and global demand for Dubai’s institutional commercial assets.

High occupancy levels and continued supply crunch underpin office rental increases

As office demand intensifies and outstrips supply, citywide office rents spiked by 25% year-on-year. This is a record rise in office rents, particularly in single-owned Grade A assets, as landlords capitalise on high demand levels and diminishing vacancy levels. Interest from new market entrants remains high and we have also seen a shift in inquiries, with many more large spatial footprint requirements emerging over Q1 2024, compared to relatively smaller requirements of previous quarters.

-Ends-

For further information or media queries, please contact:
Prathyusha Gurrapu, Director - Head of Research & Consulting, prathyusha.gurrapu@cushwake.ae
Fiona Johnston, Associate Director – Marketing, fiona.johnston@cushwake.ae

About Cushman & Wakefield

Cushman & Wakefield (NYSE: CWK) is a leading global commercial real estate services firm for property owners and occupiers with approximately 52,000 employees in approximately 400 offices and 60 countries. In 2022, the firm reported revenue of $10.1 billion across its core services of property, facilities and project management, leasing, capital markets, and valuation and other services. It also receives numerous industry and business accolades for its award-winning culture and commitment to Diversity, Equity and Inclusion (DEI), Environmental, Social and Governance (ESG) and more.