The UAE’s commercial real estate market continued to demonstrate remarkable resilience in the first quarter of 2026, with office rents recording double-digit growth in both Dubai and Abu Dhabi as demand for premium space continued to outpace supply despite heightened geopolitical uncertainty across the Middle East.
According to the latest Real Estate Market Dynamics report released by JLL, strong economic fundamentals, robust occupier confidence and limited availability of quality office space helped sustain momentum across the UAE’s office and retail sectors even as businesses adopted a more cautious approach to expansion and leasing decisions.
The report highlighted a pronounced “flight to quality” trend, with companies increasingly prioritising premium office environments, flexible leasing structures and strategically located assets amid evolving economic and geopolitical conditions.
Taimur Khan, head of Research for the Middle East and Africa at JLL, said the UAE market continued to show exceptional resilience and adaptability despite short-term regional disruptions.
“With strong underlying economic fundamentals and agile occupier and landlord strategies, the UAE’s office and retail sectors demonstrated remarkable resilience and a strong capacity for strategic adaptation,” Khan said.
“Demand remains robust, signalling the market’s inherent strength and positioning it for sustained growth as demand for prime spaces accelerates amid tightening supply.”
Dubai and Abu Dhabi both witnessed sharp rental appreciation in the office segment as vacancy levels in prime locations remained extremely tight.
In Abu Dhabi, prime office rents climbed 11.7 per cent year-on-year, while Grade A and Grade B office spaces recorded annual increases of 5.1 per cent and 4.2 per cent respectively.
Dubai posted even stronger rental growth, led by Grade B office space, where rents surged 23.4 per cent year-on-year as occupiers increasingly shifted to more affordable alternatives amid limited prime inventory in core business districts such as DIFC, Downtown Dubai and Business Bay.
Grade A office rents in Dubai rose 19 per cent annually, while prime office rents increased 17.2 per cent.
Industry analysts say the sharp rise in Grade B rents reflects a growing mismatch between supply and demand as businesses seek cost-effective options without compromising on location and connectivity.
The UAE’s broader economic diversification push, combined with strong growth in financial services, technology, consulting, logistics and family offices, has continued to fuel demand for commercial office space.
Dubai’s total office inventory reached 101.1 million square feet during the quarter, while Abu Dhabi’s office stock expanded to 4.18 million square metres.
Vacancy levels remained exceptionally low in the capital, with Abu Dhabi’s citywide office vacancy rate standing at just 1.4 per cent, while prime vacancy dropped to an almost negligible 0.1 per cent.
Dubai’s citywide vacancy rate edged up slightly to 7.3 per cent following new project deliveries, although prime vacancy remained extremely tight at 0.7 per cent.
Despite the rental surge, leasing activity showed signs of moderation as companies adopted a more measured approach amid regional geopolitical tensions and global economic uncertainty.
Office rental contract registrations declined 6 per cent year-on-year in Abu Dhabi and 7.7 per cent in Dubai during the first quarter. Monthly new contracts also fell sharply in March compared to February.
However, Dubai demonstrated notable resilience, with office lease renewals rising 11.2 per cent annually, underlining strong occupier retention and continued confidence in the emirate’s long-term growth prospects.
Analysts say global supply-chain disruptions and rising construction costs are continuing to affect development timelines, although developers are increasingly mitigating these pressures through phased procurement planning, strategic sourcing and contractor negotiations.
The UAE’s retail sector also remained relatively resilient, supported by strong domestic consumption, government stimulus measures and flexible leasing arrangements introduced by landlords.
Dubai’s retail inventory stood at 56 million square feet, while citywide vacancy tightened further to 4.8 per cent, reflecting sustained occupier demand despite softer tourism flows in certain segments.
Abu Dhabi maintained a stable retail vacancy rate of 8.9 per cent.
The report noted that the UAE government’s Dh1 billion economic stimulus package, combined with landlord flexibility through turnover-rent and short-term relief models, played an important role in supporting occupancy levels and preserving retail market stability.
Retail rents also remained firm across key segments.
Super-regional malls in Dubai recorded annual rental growth of 12.4 per cent, while Abu Dhabi’s prime super-regional malls maintained premium positioning with rents reaching Dh5,524 per square metre, supported by selective demand from high-quality tenants.
While leasing activity in Dubai softened, with new retail rental contracts declining 9.9 per cent year-on-year, Abu Dhabi recorded a 3.6 per cent increase in registrations, driven by a 16.7 per cent rise in new contracts.
JLL said retailers are increasingly focusing on flexible and experiential concepts to capture domestic demand as consumer behaviour evolves.
Community and neighbourhood retail centres are expected to remain resilient, while experiential retail, wellness-focused concepts and home-grown brands are likely to outperform amid changing consumer preferences.
Analysts believe the UAE’s strong population growth, rising tourism, expanding corporate activity and government-backed economic diversification programmes will continue to support the long-term outlook for both office and retail real estate despite short-term regional volatility.
