Dubai property market turns selective
Dubai’s real estate market is entering a more selective phase, with industrial and retail properties continuing to outperform while office and residential activity becomes more
Dubai’s real estate market is entering a more selective phase, with industrial and retail properties continuing to outperform while office and residential activity becomes more measured, according to Chestertons Global’s Q2 2026 Dubai Real Estate Market Report.Industrial rents across key Dubai logistics corridors rose 23.3% year on year in the second quarter, while retail rents increased 18.3%. Office leasing volumes grew 15.2%, but businesses increasingly opted for smaller spaces. In residential real estate, villas and townhouses continued to outperform apartments even as overall transaction activity slowed.Also Read: Nearly half of NRI property owners are looking to diversify their investment in properties in India: ReportThe report said performance is increasingly varying by property type, location and supply-demand conditions.Industrial, retail leadIndustrial property was the strongest-performing segment in Q2, with rents across key communities rising 23.3% year on year to AED 66.4 per sq ft.Demand for Grade A warehouse space continued to exceed supply, driven by logistics operators, manufacturers and traders.
Grade A occupancy was close to 95%, while renewals accounted for 74% of warehouse rental contracts during the quarter.More than 5.4 million sq ft of Grade A warehouse space is expected to be added over the next two years, with about 85% scheduled for delivery in 2026.Also Read: Dubai’s residential prices fell 4-7% during the Feb-April 2026Retail rents averaged about AED 273 per sq ft, up 18.3% from a year earlier. Prime destination and super-regional malls remained close to full occupancy, with long tenant waitlists.Tourism, population growth and limited supply of prime retail space continued to support the segment. However, renewals accounted for 75% of retail leasing contracts in Q2.Office market shifts to smaller spacesDubai’s office market showed signs of stabilisation in the second quarter.A total of 38,898 office rental contracts were registered during Q2, up 15.2% from a year earlier.
Average contract values fell as businesses increasingly chose smaller spaces.Average office rents stood at AED 205 per sq ft, marginally lower than the previous quarter but 7.5% higher year on year. Demand remained concentrated in Grade A properties, where limited availability continued to support rents.Residential activity slowsDubai recorded around 36,620 residential transactions in Q2, down 19% from the previous quarter. Total sales value fell 36% to AED 87.9 billion.Off-plan properties accounted for 76% of transaction volume.Apartment prices averaged AED 1,814 per sq ft, down 3.1% quarter on quarter but marginally above the year-earlier level. Villas and townhouses performed better, with average values rising 7.7% year on year to AED 2,339 per sq ft.John Stevens, Chief Executive Officer of Chestertons MENA, said, "Dubai's property market continues to demonstrate resilience, but we're now seeing a nuanced shift towards a more mature market where performance varies significantly between sectors."The report expects some deferred activity to return in the second half of 2026 as regional conditions and business confidence improve.
The BriefWire