UAE – Mubasher: The UAE has witnessed a continued recovery from the COVID-19 pandemic at an accelerated pace in 2022, despite the uncertainty spreading the globe, according to a recent report by real estate advisor Savills.
The encouraging performance of the Gulf nation was backed by a resurgence in travel, hospitality, and real estate demand last year.
Savills’ report, which covered the residential, office, and industrial sectors in Abu Dhabi, Dubai, and Sharjah, highlighted that the global economic uncertainties were topped by inflation, rising interest rates, and therefore, a halt in economic growth.
Associate Director, Research at Savills Middle East, Swapnil Pillai, commented: “There is definitely momentum in the property market across UAE, albeit the performance is likely to vary between sectors and pockets of the emirates going forward.”
Pillai added: “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
The residential sector in Abu Dhabi took advantage of a steady rise in the number of regional and global companies expanding their office footprint across the emirate. The volume of residential transactions was strong throughout 2022, while leasing activity remained stable. Meanwhile, rental and price appreciation in certain areas outperformed the others; the values in Saadiyat Island for renting apartments and villas hiked by more than 30% last year.
In Dubai, it was a record-breaking year in terms of transactions which were supported by strong demand, as transaction activity jumped by 66% when compared to 2021. A total of 92,000 units were transacted across Dubai, marking the highest number in its recorded history.
As for Sharjah, the demand for residential property was also strong in 2022, on the back of demand from a large expatriate population that works in neighbouring emirates yet chooses to stay in the emirate due to the relatively affordable rental values and established social infrastructure. Furthermore, the high-end segment of the market witnessed strong demand while occupancy levels will likely exceed 90%. Savills noted: “There is a significant amount of residential supply that is expected to be handed over in 2023 and beyond.”
Office Market
The demand for office real estate was buoyant across Abu Dhabi last year, where various small and medium-sized office transactions were recorded and led to high occupancy across different Grade A assets in the city. However, new supply addition remains limited; this is expected to drive prices upwards.
The office market in Dubai indicated that corporates continued to consolidate their operations across Grade A assets, the supply of which is shrinking. As for occupier demand, enterprises from the banking and financial services sector, law firms, and consulting companies were at the forefront of leasing space in Dubai.
In Sharjah, the established and prime areas of the emirate witnessed the highest leasing activity. Vacancy levels, meanwhile, remained high and averaged nearly 40-50% across Grade A developments despite stable transaction activity, which led to flat rental levels across assets. The report said: “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.”
Industrial Market
Demand for industrial and warehousing space remained upbeat in Abu Dhabi during 2022. Khalifa Industrial Zone Abu Dhabi (KIZAD) and Industrial City of Abu Dhabi (ICAD) registered strong occupier activity in line with healthy demand; rental values grew by nearly 17% on an annual basis across KIZAD and by around 10% across ICAD 1 and 2.
In 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,” according to the report. During the first half (H1) of 2022, demand was driven by companies related to the oil and gas sector due to the boost in energy prices. E-commerce and third-party logistics (3PL) firms were the other leading demand generators.
Savills noted that the e-commerce market is projected to exceed AED 29 billion in value by 2025.
As for the emirate of Sharjah, the industrial sector was positive in 2022, backed by demand from small to medium-sized industrial operators that increased throughout the year. Demand across the established industrial areas in Sharjah was witnessed from retail as well as e-commerce and other 3PL players that need to be in proximity to the established residential locations of Sharjah.
