UAE real estate yields likely remain strong, study shows

Lack of quality stock to keep office rents high, CBRE predicts

Prime residential real estate in the UAE is expected to provide an yield of 6.25 per cent to seven per cent, a new report showed on Wednesday.

According to CBRE Research’s 2024 Market Outlook for Middle East real estate, residential properties are expected to provide an yield of seven per cent to 7.5 per cent.

In the office category, the expected yield range is 6.5 per cent to 7.25 per cent for prime offices, while for grade A offices, the range is seven to 7.5 per cent.

The total value of real estate projects currently planned or under construction in the UAE, at $409 billion, accounts for 24.4% of the total projects in the Gulf Cooperation Council region, the report said.

In the residential market, the UAE continues to be the only market which has recorded both price and transaction volume growth in 2023, the report noted. “In Abu Dhabi, we expect that transaction volumes will continue to grow over the course of 2024, with new high end and prime stock expected to underpin stronger rates of price growth on average. Existing and dated stock, on the other hand, is likely to materially underperform the market,” the report said.

In Dubai, CBRE expects transaction volumes to decrease marginally. “Price growth in the apartment and villas segments of the market will continue. However, we expect this rate to moderate somewhat over the course of the year,” the report said.

In the office space category, CBRE sees occupier activity in the UAE is likely to remain resolute in the year. “We forecast that Prime and Grade A assets will continue to outperform the market, given the scarcity in supply and rising demand for high-quality assets. In Dubai, with the lack of existing quality stock, elevated demand levels and the limited number of developments in the pipeline, which are seeing strong pre-leasing activity, we expect that rental rates will continue their upward trajectory moving forward, however at a slower rate than the year prior,” CBRE said in its report.

In retail, average rents increased in Abu Dhabi and Dubai by 10.7% and 17.6%, respectively last year. “Looking ahead, we expect that the levels of demand in both Abu Dhabi and Dubai will remain strong. However, the lack of quality stock, particularly in Dubai, remains the most significant concern. Given this, we expect that new rental registrations will continue to edge down, although total demand will remain net positive. Rental rates are expected to continue to increase, however, we do expect that the rate of rental growth will moderate in both Abu Dhabi and Dubai,” the report said.