Dubai’s real estate landscape is evolving, showing signs of selectivity across different sectors. While industrial and retail properties continue to thrive, trends in the office and residential markets appear to be stabilizing, as highlighted by Chestertons Global’s Q2 2026 Dubai Real Estate Market Report.

Industrial and Retail Properties Maintain Strong Performance

The industrial sector emerged as the standout performer in Q2, where rental rates surged by 23.3% year-on-year, reaching AED 66.4 per square foot. This growth is primarily driven by high demand from logistics operators, manufacturers, and traders, leading to near-full occupancy in Grade A warehouse spaces, with occupancy rates nearing 95%. Notably, 74% of rental contracts during this quarter involved renewals, underscoring the ongoing demand for quality spaces.

Looking ahead, over 5.4 million square feet of Grade A warehouse space is set to be developed within the next two years, with approximately 85% slated for completion by 2026. Meanwhile, the retail sector also witnessed notable gains, with rents rising 18.3% to an average of AED 273 per square foot. Prime and super-regional malls are almost fully occupied, fueled by tourism, population growth, and the limited availability of premium retail spaces. Interestingly, 75% of retail leasing activity in Q2 was driven by contract renewals.

Stability in the Office Market

In contrast, Dubai’s office market appears to be stabilizing, with 38,898 rental contracts registered in Q2, indicating a 15.2% year-on-year increase. However, average values for these contracts have begun to decline, as companies increasingly opt for smaller, more affordable spaces. Average office rents were recorded at AED 205 per square foot, slightly lower than the previous quarter but still 7.5% higher compared to the same time last year. Demand remains particularly strong for Grade A properties, where limited stock aids in maintaining rental rates.

Residential Market Shows Signs of Decline

On the residential front, however, activity is showing signs of a slowdown. The second quarter saw around 36,620 residential transactions, reflecting a 19% decrease from the previous quarter. The total sales value plummeted by 36% to AED 87.9 billion. A significant portion of transactions—76%—involved off-plan properties, indicating a trend toward new developments as buyers take advantage of upcoming opportunities.

Apartment prices have averaged AED 1,814 per square foot, a slight decline of 3.1% from the previous quarter, although they remain marginally up compared to last year. In contrast, villas and townhouses demonstrated stronger performance, with average prices increasing by 7.7% year-on-year to reach AED 2,339 per square foot.

John Stevens, Chief Executive Officer of Chestertons MENA, emphasized the resiliency of Dubai’s property market, noting the nuanced shift towards maturity where performance significantly varies across different sectors. He anticipates that as regional conditions improve and business confidence grows, we may see some of the delayed activities in real estate returning in the latter half of 2026. Continued demand for high-quality spaces, coupled with supply constraints in several segments, could provide support to the market through the rest of the year.