Dubai office rents are still moving upward, even as other corners of the UAE property market begin to lose some of their earlier momentum.
Average office rents in Dubai increased by 13% year-on-year during the second quarter of 2026, according to CBRE’s latest UAE Real Estate Market Review. Prime office rents rose even faster, climbing 16%, while occupancy remained close to 94%.
Abu Dhabi’s office market looked tighter still. Rental rates increased by nearly 16% and occupancy reached around 96%, leaving businesses with fewer choices in the Grade A segment.
This is not a market where every property category is rising together. Offices and industrial assets remain strong. Residential activity in Dubai has cooled. Hotels are feeling weaker international travel demand. Retailers are watching consumer spending more carefully.
The market has become uneven, and that is probably the most important part of the story.
Dubai Office Rents Keep Rising Despite a Softer Economy
Dubai’s commercial office market continues to benefit from a familiar problem: there is not enough high-quality space available in the locations many businesses actually want.
Companies entering the UAE, expanding regional teams or upgrading from smaller offices continue to compete for well-located properties. That pressure has kept rents elevated even as the broader economic outlook has become less certain.
CBRE said office and industrial markets maintained their growth during the quarter because of limited supply and resilient occupier demand. Meanwhile, the firm revised its UAE economic outlook downward amid disruption affecting trade, tourism, aviation and consumer-facing industries.
That creates an unusual split. Businesses may be more cautious about the economy, but they are not necessarily stepping away from premium UAE office space.
For landlords with modern buildings in established business districts, the shortage still works in their favour.
Abu Dhabi Office Occupancy Reaches Around 96%
Abu Dhabi’s office market is operating with even less breathing room.
Occupancy reached approximately 96% during the second quarter, while average rents increased by close to 16% from a year earlier. Grade A availability remains particularly limited, which gives established buildings considerable pricing power.
The rise reflects more than a temporary leasing rush. Abu Dhabi has been attracting businesses connected to finance, technology, energy, government services and professional consulting. More companies are also establishing a formal presence in the capital to stay closer to regulators, government-linked entities and major institutional clients.
When occupancy reaches this level, companies searching for large, modern or immediately available offices can find the process difficult. They may have to accept higher rents, smaller spaces or locations outside their original shortlist.
It also creates an opening for new commercial developments, although projects still need time to move from planning to completion.
Free Zones Could Feel the Pressure From Limited Office Supply
The office shortage matters to UAE free zones because workspace is often part of the decision to establish a company.
Businesses do not choose a jurisdiction based only on licence fees or ownership rules. They also look at office availability, location, transport links, visa capacity, building quality and whether they can expand later without relocating the entire operation.
Free zones offering flexible offices, serviced workspaces and access to Grade A buildings may gain an advantage in the current market. Those with limited commercial stock could face a harder conversation with incoming companies.
The pressure is particularly relevant for free zones positioned around finance, technology, media, logistics and professional services. Businesses in these sectors often want more than a registered address. They want a workplace that fits regional headquarters, client meetings and future hiring plans.
With Dubai office rents rising and Abu Dhabi occupancy approaching full capacity, flexible leasing options may become a stronger part of the free-zone sales pitch.
Dubai’s Residential Market Is Starting to Cool
Commercial property may be holding firm, but Dubai’s residential market showed signs of moderation during the quarter.
Residential transactions fell by 29% year-on-year to fewer than 37,000 deals. The total value of those transactions declined to AED88 billion, compared with almost AED154 billion during the same period a year earlier. Residential rents also dropped by 2.6%, although average sales prices still recorded a modest 1.9% increase.
New supply has started to ease some of the pressure that pushed rents and prices sharply higher in previous periods.
That does not amount to a property crash. It looks more like a market catching its breath.
Buyers have become more selective. Tenants have more options in some neighbourhoods. Developers may also have to work harder to separate ordinary projects from the flood of new launches competing for attention.
Abu Dhabi Residential Property Moves the Other Way
Abu Dhabi’s residential market delivered a much stronger quarter.
Residential values increased by 21.6% year-on-year, while sales values climbed by roughly 150% to AED32 billion. Transaction volumes rose by about 80%, supported by domestic demand, investor confidence and continued interest in off-plan developments.
The contrast with Dubai is difficult to miss.
Dubai is dealing with a more mature and heavily supplied residential cycle. Abu Dhabi still has room for growth in several communities, especially where new developments are tied to infrastructure, lifestyle destinations and long-term economic projects.
Investors are not treating the UAE as one uniform property market. Capital is moving differently depending on the city, asset type and available supply.
Hotels Face a More Difficult Quarter
Hospitality was one of the weaker parts of the UAE property picture.
Hotel occupancy across the country fell by 27.7 percentage points year-on-year through June. Revenue per available room dropped by 31.8%, with Dubai experiencing the sharper impact from weaker international travel and airline disruption. Abu Dhabi received more support from domestic travel and event-led demand.
Hotel operators are responding with staycation offers, local tourism campaigns and refurbishment programmes. Still, the numbers show how quickly external disruption can reach a market that depends heavily on international visitors.
Office demand has proved more durable because businesses making long-term decisions cannot always delay expansion or regional market entry. A tourist can postpone a trip. A company establishing a UAE headquarters may not have that flexibility.
Retail Occupancy Remains High Even as Spending Softens
The retail market is under pressure, but major shopping centres are not suddenly empty.
Occupancy remained around 98% in Dubai and 95% in Abu Dhabi. Dubai retail rents still increased by approximately 3% year-on-year, despite softer tourism flows and changing consumer spending habits.
Strong occupancy gives mall owners some protection, particularly in established destinations with reliable footfall.
The challenge sits below the headline number. Retailers must manage higher operating costs while shoppers become more selective. A busy mall does not guarantee that every store is performing well.
Landlords may need to balance rent growth against the long-term health of their tenant mix.
Industrial and Logistics Property Remains a Standout Sector
Industrial and logistics assets continued to perform well during the quarter.
Government-backed industrial strategies, supply-chain localisation and foreign investment are supporting warehouse and manufacturing demand across the UAE. Leasing activity and rental growth remained positive in major industrial hubs, according to CBRE.
This could benefit free zones with direct access to ports, airports, highways and customs services.
For manufacturers and logistics operators, location can carry more weight than a slightly cheaper licence. The ability to move goods quickly, secure suitable warehouse space and expand without major disruption often determines where a business sets up.
That makes industrial property one of the clearest links between the UAE’s real estate market and its wider diversification plans.
The UAE Property Market Is Resilient, Not Uniform
Calling the UAE property market resilient is fair, but it needs context.
Dubai office rents are still rising. Abu Dhabi offices are almost fully occupied. Industrial assets remain in demand. At the same time, Dubai residential activity has slowed, hotels are feeling pressure and retailers face a less predictable spending environment.
The strongest areas share one feature: limited supply in locations where companies genuinely need to operate.
That shortage is keeping office rents high and occupancy tight. It also gives UAE free zones an opportunity to compete through flexible workspace, better-connected commercial developments and business packages designed for companies that expect to grow.
The next phase may not produce dramatic gains across every property category. It could be much more selective than that.
For businesses and investors, selecting the right location now matters more than simply betting on the UAE market as a whole.