Office Demand Defies Slowdown as Dubai Rents Jump 13 Percent

Dubai’s office rents climbed 13 percent year on year in the second quarter of 2026, with prime leases rising 16 percent and occupancy holding near 94 percent. That figure alone tells the story of a market moving in a different direction from almost everything around it.

The office sector in the UAE’s two largest commercial hubs is pulling away from weakness spreading across residential and hospitality markets, according to a market review by CBRE Middle East. Abu Dhabi’s office market proved even stronger, posting nearly 16 percent rental growth with occupancy around 96 percent. Supply constraints in Grade A space continue to drive occupier demand and pricing power, even as regional headwinds bite elsewhere.

Matthew Green, head of research at CBRE MENA, framed the quarter as a turning point. “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,” he said. “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.”

By contrast, Dubai’s residential sector contracted sharply on both transaction and value measures. Transactions fell 29 percent year on year to fewer than 37,000, while total transaction values dropped to 88 billion Emirati dirhams (about $23.9 billion), down from nearly 154 billion dirhams in the same period a year earlier. Residential rents dropped 2.6 percent year on year, though sales prices edged up 1.9 percent, a split that signals a market caught between buyers and renters with different expectations.

Abu Dhabi’s residential market moved in the opposite direction. Values rose 21.6 percent year on year, sales values jumped roughly 150 percent to 32 billion dirhams, and transaction volumes climbed about 80 percent, reflecting stronger local appetite for property purchases in the emirate.

Authorities have moved to ease pressure on residents caught in the residential market shifts. Abu Dhabi froze rental increases in June. Dubai expanded its Flexi Rent initiative to allow tenants to pay rent in instalments rather than lump sums, offering practical relief to households navigating tighter financial conditions. A separate Living Market Dynamics report from JLL identified simultaneous moderation in both sales prices and rental rates in the second quarter, attributing the softening to cooling demand and rising supply amid regional uncertainty.

Hospitality faced the steepest declines of any sector. UAE hotel occupancy fell 27.7 percentage points year on year through June, while revenue per available room dropped 31.8 percent. Dubai bore the brunt of the decline, though Abu Dhabi was cushioned by domestic tourism and event-driven bookings.

Retail markets proved more resilient. Occupancy held firm at around 98 percent in Dubai and 95 percent in Abu Dhabi, with Dubai rents still rising by about 3 percent year on year. Foot traffic may have softened, but retail landlords retained pricing power.

The UAE’s performance sits within a broader Gulf property landscape marked by divergent trends. Saudi Arabia’s Real Estate Price Index rose just 1.3 percent year on year in the second quarter of 2026, as gains in residential and agricultural properties offset weaker commercial values. Qatar’s market remained stronger, with its property price index climbing 8.7 percent to a record 244.56 points in May, supported by robust transaction activity and mortgage lending.

Whether Dubai’s office market can sustain double-digit rental growth if geopolitical pressures persist, or whether the residential cooling deepens into something more structural, will be the defining question for the second half of 2026.