The office markets across both Dubai and Abu Dhabi remained the strongest-performing asset class during the quarter, driven by robust demand for high-quality space and a shortage of Grade A supply in key business districts, according to CBRE Middle East, a global leader in commercial real estate services.
While economic activity across the region has been impacted by ongoing geopolitical uncertainty, the UAE continues to benefit from a diversified non-oil economy, a business-friendly environment and its position as a leading hub for trade, technology, finance and investment. These factors have helped support market activity across several real estate sectors, particularly office and industrial & logistics assets, stated CBRE in its report.
The 'UAE Real Estate Market Review for the third quarter of 2026' highlighted the resilience of the country's real estate market, supported by robust occupier demand, a diversified economic base and sustained investor interest, despite a more complex macroeconomic and geopolitical environment.
The non-oil economy remained the primary driver of growth during the third quarter, with non-oil activities accounting for 79% of the UAE economy. Business activity also remained healthy, with the UAE Purchasing Managers' Index (PMI) reaching 55.3 in both August and September, a 20-month high, signaling continued expansion across the non-oil private sector.
The country's ability to attract businesses, investors and skilled talent continues to underpin occupier demand and support long-term real estate fundamentals, said the CBRE report.
In Dubai, average office rents increased by 12% year-on-year, while occupancy levels reached approximately 95%, reflecting continued pressure on the availability of premium office stock. Core locations including DIFC, Business Bay and Dubai Internet City continued to report exceptionally strong leasing activity, with demand largely driven by financial services, professional services and technology occupiers seeking high-quality workspace.
Abu Dhabi recorded even stronger growth, with average office rents increasing by 20% year-on-year and occupancy levels reaching 96%. Demand was primarily driven by financial institutions, multinational occupiers and the continued expansion of ADGM, further reinforcing the capital's position as an increasingly important regional business center.
According to CBRE, Dubai's Residential Market moved into a more balanced phase following several years of rapid growth. Average residential sales prices remained broadly stable during the quarter, declining by approximately 1% year-on-year, while average rental rates softened by 7%.
Transaction activity also moderated as buyers adopted a more measured approach and developers slowed the pace of new project launches amid evolving market conditions. Despite this adjustment, residential values remain significantly above pre-pandemic levels, highlighting the substantial gains achieved during the market's recent growth cycle.
In Abu Dhabi, market momentum remained positive. Apartment prices increased by 13% year-on-year, while residential transaction volumes rose by approximately 5% compared to the same period last year. Demand continued to be supported by both owner-occupiers and investors, particularly across new master-planned communities and emerging residential destinations.
The UAE’s Hospitality market remained under pressure during 2026 as regional geopolitical uncertainty impacted travel patterns across several key source markets. However, performance improved through the third quarter as air connectivity recovered and visitor arrivals gradually strengthened.
Across the UAE, hotel occupancy declined by approximately 24-percentage points year-to-date, narrowing from a 28-percentage point decline in H1, while Average Daily Rate (ADR) and Revenue per Available Room (RevPAR) decreased by 8% and 30% respectively compared to the previous year.
Dubai welcomed almost seven million international overnight visitors during the first eight months of the year, with monthly arrival volumes showing steady improvement since March, supporting a more positive outlook heading into the peak tourism season.
Against a backdrop of softer tourism activity, the UAE Retail Market maintained healthy fundamentals. Retail occupancy rates reached 97% in Dubai and 96% in Abu Dhabi, reflecting continued demand for prime retail space. Average retail rents increased by 5% year-on-year in Dubai and 1% in Abu Dhabi, supported by limited supply and continued investment in destination-led retail environments. Prime shopping destinations continued to outperform, benefiting from strong domestic spending and a growing emphasis on experiential retail concepts, stated the real estate expert in its review.
The Industrial and logistics assets continued to rank among the UAE's best-performing sectors, supported by sustained occupier demand and limited availability of modern facilities.
Average industrial rents in Dubai increased by 12% year-on-year, while Abu Dhabi recorded rental growth of 6% over the same period. Demand continued to be driven by e-commerce operators, third-party logistics providers and businesses seeking to optimize regional supply chains. Strong investor appetite for logistics assets also remained evident as occupiers competed for high-quality warehouse and distribution space, it added.
Matthew Green, Head of Research at CBRE Mena said: "While 2026 has presented a more challenging operating environment than initially anticipated, the UAE real estate market continues to benefit from solid fundamentals. Demand for high-quality office space remains exceptionally strong, industrial and logistics assets continue to see healthy occupier activity, and Abu Dhabi's residential market is recording sustained growth."
"Although sectors linked to international tourism have faced greater pressure this year, the UAE's diversified economy, pro-business environment and ability to attract global investment continue to support real estate performance," he added.-TradeArabia News Service
