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Dubai Real Estate Market Overview - Q3 2012

​Key Highlights:

  • The Dubai economy is still on a recovery path. Gross Domestic Product is projected to grow by 4.5% in 2012.This performance is being driven by the strong growth of key sectors such as tourism, commerce, retail, hospitality and logistics.

  • The real estate investment market has been quiet over the summer months, with no major open market commercial transactions reported in this seasonally quiet period. The most significant sale over the quarter was a residential tower in the Deira area of Dubai that was reportedly sold to a Saudi investor for AED 130 million.

  • Asking rents for prime office space remained flat in Q3, while secondary rents faced more downward pressure. In line with global trends, occupier consolidation and portfolio optimisation remain the key focus in Dubai. Larger companies continue to show interest in upgrading premises with more flexibility in their leases. There has been limited new office supply entering the market in the third quarter and a number of projects have been delayed into 2013.

  • The overall residential market has recorded another positive quarter, with the villa market continuing to outperform the apartment sector in Q3. Prime residential buildings in well established locations continue to see improved performance, but secondary locations are still suffering from rental and pricing declines as tenants relocate to new high quality projects.

  • There remains strong demand for retail space in the best performing super-regional malls (eg: Dubai Mall, Mall of the Emirates), resulting in sustained prime rents of AED 4,700 /sq m. However the retail market is becoming increasingly two-tier and older, less popular malls are seeing weakened demand from consumers and retailers, with mall owners having to consider new marketing techniques and product positioning.

  • The hotel sector has continued its strong performance in Q3 with occupancy levels improving to 77% from 74% in the same period last year. This growth has been mainly driven by the increase in tourist arrivals compared to the same period last year. The recovery of the Dubai hotel market has been reflected in an increase in both Average Daily Rates (ADRs) and Revenue Per Available Room (RevPar) levels.

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