• Off-plan market continues to thrive with a 61% y-o-y transaction increase and a 42% y-o-y rise in project launches
  • While the supply pipeline grows, Q2 2024 saw a slowdown with only 5,391 units delivered compared to 8,350 in Q1
  • The ultra-prime market experienced a 12% y-o-y increase in transactions, however, quarterly numbers have dipped
  • City-wide sales prices rose for the 16th consecutive quarter while rents rose for the 14th consecutive quarter
  • Dubai’s office market gets a boost with several new launches, but supply shortage is likely to persist until 2027-2028
  • City-wide office occupancy has reached a record high of 90%, with Grade A offices seeing an even higher rate of 93%
  • Citywide office rents are up by 19% y-o-y as demand outpaces supply

Dubai, UAE: According to Cushman & Wakefield Core’s Q2 2024 market update, while Dubai's market continues to perform steadily across most indicators, signs of stabilization are emerging. The pace of growth is slowing, especially in the secondary residential market, which is gradually transitioning into a stabilization phase.

RESIDENTIAL MARKET

Rising project launches continue to underpin the supply pipeline, however, handover volumes remain moderate.

During Q2 2024, a lower rate of handovers was observed with just 5,391 units delivered compared to more than 8,350 units in Q1 2024. A total of 24,300 residential units are anticipated over the remainder of 2024, bringing the annual total to nearly 39,000 units, which is similar to the number of handovers in 2023 and in line with market demand.

Prathyusha Gurrapu, Head of Research and Consulting at Cushman & Wakefield Core says “Growing from a high base, new project launch volumes continue to see record numbers with a 42% y-o-y increase, as demand and absorption remain buoyant. We have also seen developers with large landbanks initiating projects and smaller private developers aggressively acquiring land, which continues to be a challenge to source.”

Off-plan market continues to dominate while the secondary market shows sustained signs of stabilization.

Prathyusha says “Until the end of 2021, the differential between off-plan transactions and secondary market transactions was limited, however, over the last 2 to 3 years, off-plan transactions have sharply increased, underpinned by the rise in new project launches. While secondary market transactions have shown a moderate growth of 5%, off-plan transactions saw a substantial spike of 61%. In Q2 2024, off-plan transactions accounted for more than double the number of secondary market transactions, indicating that the off-plan market has a higher share of investors compared to end-users.”

Growing indications of market stabilisation emerge

Prathyusha says “Primary off-plan sales prices(inventory sold by developers) are higher than secondary off-plan prices (resales by individuals) across most Dubai districts and off-plan projects. Although the percentage difference is still in single digits, it suggests that sellers are struggling to match original prices and selling slightly below market value to exit. This trend is worth monitoring, as it may grow in the coming quarters with more off-plan supply entering the market.”

Other indicators of market stabilisation include a higher number of sales listings witnessing no change in listed prices in H1 2024, while a much lower number of listings saw prices increase compared to the same period. Furthermore, since Q3 2023, the median residential listing price has declined at an average of 7% q-o-q, further indicating market adjustment.

Sales prices moderate in prime districts while mid-market and affordable districts see a sharp rise

While city-wide sales prices continue their upward trajectory for the 16th consecutive quarter with a 21% year-on-year increase, we have seen the prime districts mark relative moderation in sales price increases while mainstream and affordable districts are witnessing steep increases albeit significantly impacting their affordability.

Ultra-Prime Properties: Dubai remains a strong global ultra-prime market with more than 305 residential properties sold above AED 20 million in Dubai in Q2 2024, marking a 12% y-o-y increase. However, we have seen a marked slowdown in off-plan transaction volumes over the last two quarters.

Prathyusha says, “This is mainly due to the lower off-plan inventory available in the market for these ticket sizes. That said, secondary market ultra-prime transactions have retained their steady activity levels with 135 transactions - the highest ever number of secondary market ultra-prime transactions registered in Q2 2024.

City-wide rents rose for the 14th consecutive quarter, however, moderation was seen in the villa market

We saw a relative stabilization in city-wide villa rents, which have risen by 13% year-on-year, whereas apartment rents are up by 22% compared to the same period last year. Household incomes are not keeping pace with rising rents, which is further contracting disposable incomes. We have seen a higher percentage of tenants continuing to renew, with the number of renewals in Q2 2024 seeing a 14% increase. Similar to the trends seen in the sales market, rents in the mid-market apartment districts saw the steepest rise in rents, whereas prime districts saw lower levels of increase.

OFFICE MARKET

The supply-deprived office market finally witnesses several office project announcements; however, the market is expected to remain undersupplied until 2027-2028

Robert Thomas, Head of Agency at Cushman & Wakefield Core says “While the supply crunch in the office market continues to impact rents and occupancy levels, developers attuned to market conditions are finally initiating new office developments to address this shortage. YTD 2024 has seen a few major and much-needed announcements including Immersive Tower in DIFC, Offices in D3 Phase 2, the mixed-use development by Aldar on Sheikh Zayed Road, and multiple developments under discussions in DIFC. However, it would still take up to 4 years until this supply is handed over and the likelihood of them being pre-let remains high. This indicates that the supply shortage is likely to persist until 2027-2028 when a substantial portion of the announced inventory is expected to be completed.

Office Supply: Q2 2024 saw nearly 260,000 sq. ft. delivered in Dubai CommerCity. Over 1.63 million sq. ft. is expected to be handed over in the remainder of 2024, mainly from Expo City Dubai, Innovation Hub in Dubai Internet City, office component in Wasl Tower, and Millenium Plaza Downtown (renovated Crowne Plaza), both on Sheikh Zayed Road.

Robert says “City-wide office occupancy has hit a record 90%, with Grade A offices at 93% and expected to increase further. Business Bay, Sheikh Zayed Road, DIFC, and JLT have seen the sharpest rise, and Dubai CommerCity, with its large floor plates and modern build quality, is also experiencing high demand. The CBD districts, including Downtown Dubai, DIFC, and Sheikh Zayed Road, are above 95% occupancy, intensifying rent pressures and supply shortage.”

High occupancy levels and continued supply crunch underpin office rental increases

As office demand intensifies and outstrips supply, citywide office rents spiked by 19% year-on-year. Activity levels have surged across various tenant sectors with freezones particularly drawing significant demand as a growing number of new and existing businesses seek to establish or expand their presence in the city. The market remains landlord-friendly, and this dynamic is putting additional pressure on companies, particularly global occupiers, who may struggle to meet the tight decision-making deadlines that the current market dictates.

Rising demand from global occupiers

The UAE, and Dubai in particular, is increasingly becoming a focus market for many international firms as they set to invest more into their operations and workforce. Emerging as an ideal location for people across workforce levels, the city’s appeal is driven by factors such as safety, zero personal tax, a strategic geographic position for business and personal travel, robust infrastructure, and a positive environment.

The UAE is certainly one of the most desirable locations to live, work, and play globally, more so now than ever before. This uptick in demand does come with some deterrents that are impacting the market, including rising rents, rising cost of living, and a lack of availability and flexibility. Whilst Dubai is an outlier in terms of market conditions against global markets, the majority of global corporates are increasingly aware and accepting of the landlord-friendly nature of the market. Dubai still offers competitive rents in comparison to global cities including London, Paris, Singapore etc, however, prime submarkets like DIFC and DWTC in Dubai are starting to align. Most global occupiers are looking at renewing for longer terms than previously agreed to gain more stability.

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 nearly 400 offices and 60 countries. In 2023, the firm reported revenue of $9.5 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), sustainability and more. An independently owned and operated affiliate of Cushman & Wakefield, operating in the UAE since 2008. For additional information, visit www.cushwake.ae.