The UAE’s commercial real estate sector demonstrated resilience during the second quarter of 2026 despite regional geopolitical headwinds that weighed on tourism, retail and broader economic activity, with office and industrial markets continuing to benefit from supply constraints and strong occupier demand.
Dubai’s office market recorded average rent increases of 13 percent year-on-year in Q2 2026, while prime office rents climbed 16 percent. Occupancy levels remained exceptionally high at approximately 94 percent, reflecting continued shortages of Grade A office stock across key commercial districts and free zones including DIFC, TECOM and DMCC, where pre-leasing activity absorbed a significant portion of future supply before completion.
Abu Dhabi’s office fundamentals proved equally robust, with average rents rising nearly 16 percent year-on-year and occupancy reaching approximately 96 percent. Demand remained concentrated in the Abu Dhabi Global Market (ADGM) freezone, supported by continued growth across financial services sectors, including hedge funds and investment activities. With less than 300,000 square meters of new office space expected between 2026 and 2027, supply constraints are likely to persist in the medium term.
“The second quarter marked a notable shift in the UAE’s economic and real estate landscape, as regional geopolitical developments began to weigh on business activity, tourism flows and broader market sentiment. While several sectors have seen a moderation in performance, the impact has been uneven, with office and industrial markets continuing to benefit from limited supply and sustained occupier demand,” said Matthew Green, Head of Research at CBRE MENA.
The report forecast a marginal GDP contraction of 0.04 percent for 2026, reflecting disruptions to trade, tourism, aviation and consumer-facing sectors, while projecting a strong recovery in 2027 as regional conditions stabilize and economic activity normalizes.
The UAE’s industrial and logistics real estate market remained a standout performer, supported by government-led industrial strategies, supply chain localization initiatives and ongoing foreign direct investment. Industrial exports reached AED262 billion in 2025, while programs such as Operation 300bn and Make It in the Emirates (MIITE) continue to attract manufacturing and logistics investment.
Despite regional supply chain challenges, leasing activity remained resilient and rental growth continued across major industrial hubs. In Dubai, strong rental growth was recorded across key logistics destinations including Dubai Industrial City, Dubai Investments Park and National Industries Park. Abu Dhabi’s market was supported by significant investment commitments, including AED48.5 billion announced through the MIITE initiative and major new logistics agreements within KEZAD.
Dubai’s residential real estate market experienced noticeable moderation during the second quarter as demand softened and transaction activity declined. While residential sales prices remained 1.9 percent higher year-on-year, rental performance turned negative, with average rents declining by 2.6 percent annually and 6.2 percent quarter-on-quarter. Increased supply, slower transaction activity and weaker occupier demand contributed to a cooling market environment.
Transaction volumes fell by 29 percent year-on-year during Q2 2026, with fewer than 37,000 residential sales recorded compared to more than 51,000 in the same period last year. Total transaction values declined to AED88 billion, down from nearly AED154 billion in Q2 2025. Approximately 18,000 residential units were completed during the first half of the year, adding to available inventory while helping moderate pricing pressures.
In contrast, Abu Dhabi’s residential market continued to outperform, supported by strong domestic demand and sustained investor confidence. Residential values increased by 21.6 percent year-on-year during Q2 2026, driven primarily by apartment price growth of 24.4 percent. Rental growth remained positive at 3.6 percent annually despite short-term moderation during the quarter.
Transaction activity in Abu Dhabi proved particularly robust, with sales values reaching AED32 billion, representing a 150 percent increase compared to Q2 2025, while transaction volumes grew by approximately 80 percent year-on-year. The off-plan market remained the dominant segment, accounting for roughly 83 percent of all residential transactions and 85 percent of total sales value, reflecting continued demand for newly launched projects.
“What remains particularly noteworthy is the speed and scale of the UAE’s policy response, from supporting business continuity and trade flows to advancing economic partnerships and diversification initiatives. Although near-term conditions are likely to remain challenging, the country’s long-term growth trajectory remains supported by structural reforms, strategic investment and its position as a leading hub for trade, capital and talent,” added Green.
The divergent performance across real estate segments underscores the UAE market’s complexity, with commercial property fundamentals continuing to strengthen while residential markets adjust to increased supply and shifting demand patterns across both emirates.