Behind the loud headlines about the UAE’s housing boom lies an equally dynamic and strategically important sector – the commercial property market. In the first quarter of 2025, office space, shopping malls and real estate investment trusts (REITs) demonstrated extraordinary strength, fuelled by a robust economy and the UAE’s status as a global business hub. For institutional investors and financial analysts, this segment offers a compelling story of sustainable earnings, high demand and limited risk, particularly in prime office space.
Market Barometer: Emirates REIT’s stellar performance
The performance of Emirates REIT, one of the region’s leading real estate investment trusts, serves as an excellent barometer of the health of the commercial real estate market. The fund reported an exceptionally strong first quarter of 2025, illustrating key market trends:
- Revenue growth: property revenue increased 24% year-over-year (at comparable properties) to $19 million.
- Operating Efficiency: Net finance costs decreased dramatically by 57% to $6 million due to successful debt refinancing.
- Asset Value Growth: Net Asset Value (NAV) per share jumped 64% year-over-year to an all-time high of $2.69 per share.
- Strong operational performance: portfolio occupancy reached an impressive 95%, supported by 17% annual rental growth in retail and office space.
These results highlight the ability of well-managed commercial property portfolios to generate strong and sustainable income, even after asset disposals. They are a direct reflection of high demand and rising rental levels in the sector.
A tale of two office markets: Dubai and Abu Dhabi
Office markets in the UAE’s two largest cities show similar trends of strong demand, but with different nuances that investors need to understand.
- Dubai: the problem of “desirable” shortage: the Dubai market is characterized by a chronic shortage of quality office space, especially in prime locations. This imbalance between supply and demand has led to steadily rising rental levels and pre-leasing becoming the norm for new developments. Companies are forced to book space months or even years before the buildings are completed. Only around 100,000 sqm of new space is expected to be delivered in 2025, and much of it has already been contracted. This shortfall creates an extremely favourable environment for owners of prime office assets.
- Abu Dhabi: The quiet winner: the capital’s market is also booming, fuelled by a strong non-oil sector and targeted government investment. Average office occupancy has reached 96% and prime office rents are up nearly 15% year-on-year. The Abu Dhabi market is perceived as more stable and predictable, making it attractive to institutional investors seeking long-term security and consistent income.
Demand drivers and future prospects
Strong demand for commercial space is directly linked to the UAE’s economic fundamentals. Economic diversification, population growth and the continuous influx of international companies choosing the UAE as their regional headquarters are the main drivers. In addition, a growing focus on sustainability means that energy efficient, ‘green’ buildings are becoming increasingly important to occupiers and investors, creating a premium sub-segment of the market.
Conclusion: a compelling argument for the institutional investor
The UAE commercial property market in 2025 offers a clear and compelling investment thesis. Strong demand coupled with limited supply, particularly in the prime office segment, is creating an environment of rising rents and high occupancy. For institutional investors looking for stable, income-generating assets backed by strong economic fundamentals, commercial real estate in the UAE, particularly in Dubai and Abu Dhabi, represents one of the most attractive opportunities in the global market today.
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