The commercial real estate sector in the UAE exhibited notable resilience during the first quarter of 2026, with office rents rising by double digits in Dubai and Abu Dhabi amid increased tensions in the region. The high level of demand for top-quality office spaces contributed to the strong performance of office rents.

According to the recent Real Estate Market Dynamics report published by JLL, good economic conditions, healthy occupier sentiment, and a shortage of high-quality office spaces were factors that contributed to maintaining momentum within the UAE office and retail markets, despite a cautiously conservative business stance on expansion and leasing.

JLL, also known as Jones Lang LaSalle, is among the most prominent professional companies offering a range of services related to real estate and investment management. Being based in Dubai, United Arab Emirates, JLL offers a wide array of services in areas such as commercial, residential and industrial real estate. JLL MENA is a subsidiary of the company specialising in innovating new real estate solutions. JLL stands out through the uniqueness of its real estate business model, which revolves around concepts of sustainability and technology integration.

There was mention of the strong trend towards “flight to quality”, where companies preferred high-quality office space, flexible lease arrangements, and well-located real estate in a changing economic and geopolitical environment.

According to Taimur Khan, who heads the Research team for Middle East and Africa in JLL, the UAE real estate sector maintained its high level of resilience amid any disorder in the region.

Despite challenging market conditions, the resilience and adaptability of the commercial real estate sector in the United Arab Emirates were proven thanks to sound economic fundamentals and strategic occupier and landlord tactics, said Khan. The demand remains strong, underscoring the market’s resilience and its ability to grow as the demand for quality space accelerates due to shrinking supply.

Quality Flight Fuels Double-Digit Growth in Rental Rates for Dubai and Abu Dhabi.

There has been rapid rental growth in the office market in Dubai and Abu Dhabi since there was very little vacancy in prime areas. The annual increase for prime office rental prices was 11.7% in Abu Dhabi. Meanwhile, the rental price increase for Grade A offices and Grade B offices was 5.1% and 4.2%, respectively.

Dubai performed much better, with office rental prices for Grade B offices increasing by 23.4% year-over-year, with tenants opting for the less expensive alternative due to scarcity in prime supply in Dubai’s main business hubs, such as DIFC, Downtown Dubai, and Business Bay.

Grade A office rentals have gone up by 19% annually, whereas prime office rents have risen by 17.2%. Analysts suggest that the steep increase in Grade B office rentals is due to an increasing discrepancy between demand and supply among companies seeking cost-effective, strategically located office spaces.

UAE’s wider trend towards economic diversification, along with rapid growth in the financial services, tech, consulting, logistics, and family office sectors, has further fueled the demand for office spaces. The total supply of office space in Dubai is 101.1 million square feet, while the total supply of office space in Abu Dhabi increased to 4.18 million square metres.

However, vacancies remained extremely low in the capital, where the Abu Dhabi city-wide office vacancy was measured at just 1.4%, while prime vacancy rates fell to a minuscule 0.1%.

The overall vacancy rate for Dubai increased marginally to 7.3% due to the completion of projects, although the prime vacancy rate was still very low at 0.7%.

Although there was an evident increase in leasing activities, signs pointed to a slowing down of leasing deals due to the conservative attitude adopted by companies in view of political instability in the region, as well as uncertainties in the international business environment.

Registrations of office leases decreased by 6% year-on-year in Abu Dhabi and by 7.7% in Dubai during Q1. The number of new monthly contracts was also lower in March compared to February. Dubai exhibited an impressive degree of resiliency, as reflected in the 11.2% annual increment in the renewal rates of office leases.  

According to analysts, supply chain disruptions and increased building costs continue to impact project delivery schedules; however, developers are managing these challenges more efficiently by means of staged procurement and negotiations with contractors.

Retail Sector Strengthens Through Flexible Leasing and Consumer Spending

The UAE’s retail industry also performed well due to high consumer spending in the country, government initiatives, and flexible lease conditions offered by property owners.

There was an increase in the retail space in Dubai to 56 million sq ft, with the retail vacancy rate dropping to 4.8% for the entire city. There was occupier demand for these retail spaces amid weakening tourist arrivals in some sections. The vacancy rate in Abu Dhabi remained steady at 8.9%.

According to the report, the contribution of the Dh1 billion economic stimulus package provided by the UAE government, along with the ability of landlords to be flexible, utilising the turnover rental and short-term relief schemes, contributed significantly to this stability. Lease rates for the retail sector remained consistent in all vital sectors.

The rental income recorded 12.4% growth for super-regional malls in Dubai, whereas the prime super-regional malls in Abu Dhabi remained at a premium rental level with rental prices at Dh5,524 per square metre.

While leases have softened up in Dubai due to the decline in the number of retail leases signed by 9.9%, there has been a rise in registrations in Abu Dhabi by 3.6%, because of the rise in new contract signings by 16.7%.

According to JLL, retailers have been adopting flexible and experiential designs to cater to local customers amid changing trends in customer behaviour.

Community and neighbourhood retail hubs will be able to withstand any shocks, whereas experiential retail, wellness-themed retail stores and indigenous brands will be better off due to evolving customer tastes.

According to analysts, the UAE’s strong population growth, increasing tourism, growing business activity, and government-led programs for economic diversification are expected to bolster the future prospects of office and retail real estate.

Resilient Yet Risky

It seems that the real estate market in the UAE is experiencing an interesting contradiction: success based on shortage. Indeed, the fundamentals of the economy are very robust, but ultimately, the increase in rent rates is driven by the lack of high-quality office spaces. The effect of the “flight to quality” phenomenon, whereby businesses prefer high-quality offices that offer flexibility and excellent location, has been that of competition, which favors the landlord and disadvantages the tenant.

Rapid rent growth in Dubai and Abu Dhabi, however, also illustrates both strength and danger. It exhibits confidence in economic diversification in the country and also shows how the United Arab Emirates has the ability to attract businesses from abroad. However, it conveys an existing problem, which is that supply falls short of demand, particularly for prime locations, forcing businesses to opt for Grade B premises.

The strength of the real estate market in the UAE is noteworthy, although it depends greatly on availability. If future development of offices does not keep pace with rising demand, prices could increase even more, which might cause larger companies to avoid expansion due to the high costs. The most important factor of the property market is that it is sustainable.