Finally growing up (But hopefully not too much) – 2025 Outlook and Emerging Trends
Sector Foreword
It has been a hectic year for everyone in the UAE real estate market, and for our team of lawyers this has been no different. In our daily conversations with developers, institutional investors, asset managers, occupiers and operators we observed during the first quarter of 2025 a UAE property market remaining fundamentally sound, yet exhibiting a progressively higher level of selectivity and institutionalization.
If you read the newspapers (or simply drive on the Dubai roads) you can tell the UAE’s property landscape continues to be supported by favourable macroeconomic conditions, structural regulatory reforms, and sustained investor confidence (so many new investors in so many cars!). Yet beneath the headline growth figures lies a more nuanced reality: market participants are becoming more discerning in how and where they allocate capital and resources. Here based on our experience and from my position is Head of Real Estate at the largest law firm in the Middle East, I am looking to set out the key themes emerging from our real estate client base and the implications we foresee for stakeholders.
Against that backdrop, capital is still flowing into property but is being deployed with markedly greater precision as stakeholders focus on sector-specific supply and demand imbalances, the cost of debt, and long-term regulatory visibility.
Both Dubai and Abu Dhabi continue to experience an acute shortage of Grade-A, centrally located office space. From our side our clients driving the demand during the past twelve months have been predominantly in global banking, asset-management, life-science and professional-services occupiers establishing regional hubs or expanding existing footprints. On speaking with the authorities vacancy in Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) core assets sits below 5 per cent, and effective rents in prime towers have risen by 15–18 per cent year-on-year with minimal rent-free incentives. Development pipelines remain modest because construction-cost inflation, elevated finance costs and heightened ESG requirements have tempered speculative starts. Consequently, from what our consultant clients and developers are telling us the landlord-favourable dynamic is likely to persist through 2025 unless a material volume of new inventory is fast-tracked.
We have undertaken more high net worth residential work this year than at any time in the firms history. With three transactions alone each having a value of AED600m we have seen first hand that the market here has changed radically. From speaking to the Dubai Land Department we understand that more than 40,000 off-plan units were released in the first five months of 2024 alone with a similar amount being expected for the same period in 2025; yet from the launches we have assisted on demand remains solid, reflecting liquidity from end-users, overseas investors and private wealth inflows from Europe, Russia and Asia. We have been instructed on multiple master-planned villa and townhouse communities along the E611 corridor, where developers are leveraging flexible post-handover payment schedules and comprehensive amenity packages. Whilst our instructions have been regular from the agents we work with it would appear the ultra-luxury segment is plateauing in price growth but has not softened materially, primarily because genuine new supply of waterfront and branded-residence product remains limited.
Abu Dhabi has been one of our most active markets in the past year. New players such as Sinyar and Modon are shaking up what had been a rather stagnant developer landscape in the capital. In Abu Dhabi, transactional activity seems steady rather than exuberant, with Yas Island, Saadiyat Island and Al Raha Beach continuing to be prominent.
What continues to set Abu Dhabi apart is its increasing development of arts and leisure based developments. Obviously there is the Guggenheim slowly rising but we are aware of (and have been instructed on) a number of very exciting tourist focused attractions which will transform Abu Dhabi’s global profile when they are complete.
Ras Al Khaimah and the Northern Emirates As the only major law firm with an office in Ras Al Khaimah (RAK) we have seen first hand its transition from a sleepy tourist hub to now a booming globally focused destination. The imminent commencement of the operations at the Wynn Al Marjan Island—poised to be the first integrated resort in the region permitted to offer regulated gaming—has stimulated a wave of hospitality, branded residential and mixed-use master developments across the emirate’s coastline. Land values on Al Marjan Island have tripled in less than two years, and a pipeline exceeding 8,000 keys is now in various planning stages. Institutional investors previously confined to Dubai are acquiring positions in RAK to capture early-cycle appreciation and to diversify risk away from the established markets. One of the most interesting impacts can be seen in Umm Al Quwain and Ajman which are also benefiting indirectly as major hotel developers and developers looking to market commuter/second homes seek more competitive land deals in new markets.
As a team work in RAK now takes a greater portion of our time than any other jurisdiction other than Dubai and Abu Dhabi. The regulatory landscape is much changed and we see a lot of opportunity there.
Our hospitality team led by Ian Arnott has had its busiest year ever.
Hotel fundamentals across the UAE are outperforming pre-pandemic benchmarks. Year-to-date national occupancy is tracking in the mid-70 per cent range, with Average Daily Rate and Revenue Per Available Room in Dubai at record levels for high-season months.
Growth is broad-based but led by experimental luxury, extended-stay and wellness-centric resorts. Operators are accelerating conversion projects to meet burgeoning demand. Further, we have acted on several legacy four-star assets which have entered repositioning programs to target the upscale lifestyle segment. The rise of multiple prominent funds in the UAE looking to focus on the hospitality space has been a big feature of this year. Their pockets are deep and increasingly they are bringing in global money. This will increase pressure on the local regulators to implement in practice their funds regimes which at the moment remain very much a paper exercise.
The UAE’s retail market continues to its traditional separation between dominant, experience-led super-regional malls and secondary community centres. From our intelligence we know prime retail schemes in Dubai and Abu Dhabi report occupancy above 95 per cent. New lease structures are increasingly turnover-linked, reflecting landlords’ confidence in tenant performance and the sophistication of point-of-sale data integration.
From the demand we are seeing from clients there are multiple new retail developments coming on line with a number of community malls being the focus. Legally we await the (very delayed) update to the Dubai leasing law which has been expected for a number of years. Our view as a firm is its publication any time soon is unlikely as the market seems to be operating effectively under the current regime.
Logistics has long been a cornerstone of our practice here in the UAE. Structural undersupply persists in institutional-grade warehousing, cold-storage and e-commerce fulfilment centres, particularly within a thirty-minute radius of Jebel Ali Port and Abu Dhabi’s Khalifa Port. We have undertaken a number of new developments in the logistics as well as multiple fund acquisitions this year. Land constraints, zoning-approval timelines and utility-capacity limits have inhibited speculative development. The Northern Emirates are starting to absorb spill-over demand, although the extension of Etihad Rail’s freight network has been seen as key by a number of our clients. Outlook for the rest of the year.
As things stand here at Al Tamimi real estate this has been the busiest start to a year since 2008. I admit this is not a comfortable statement to hear for many (including myself) who believed a correction was coming and we still don’t know the impact on the wider market in the UAE of lower oil prices and US imposed tariffs.
All that being said from our clients across the board there seems to be a quiet optimism that even if a correction was to occur it would be manageable and in line with the UAE’s position as a safe haven in a very turbulent.
Anyone who has been here since before 2008 (or even 2019) will recognize this is a completely different market here in 2025. After years of hype it would appear the UAE is now on track to become the global business hub it has always aspired to be. Along with the influx of family offices and hedge funds from all over the globe we have seen the arrival of all the supporting professionals and their families. The population to support our real estate market is growing and the figure I always like to quote is that there will be over 106 new schools opening in Dubai before 2030. That is a very long way from the wild west style boom town I came to prior to the 2008 crash.
I hope you enjoy our publication this month. It hopefully provides some insight which will assist and from all the team here at Al Tamimi we wish you all the best for the rest of the year.
Andrew Thomson Partner, Head of Real Estate, Hotels & Leisure
