Are you interested in learning about the fast increase in retail rents and their causes in Dubai and Abu Dhabi? This trend will influence your decisions If you own a business organization or are planning to start a retail business in these cities.
In recent months, retail rents have increased at double-digit rates due to heavy demand and limited availability of quality space.
In the first quarter of the year, retail rents in Abu Dhabi improved by 14.7%. In Dubai, rents increased by 10.5%. Several factors drive this upward momentum. One of the big purposes is the influx of foreign retail brands entering the local market, especially in Dubai. In addition, there can be a robust demand for the food and beverage industry.
Retail Rents In Dubai And Abu Dhabi Surge By Double Digits
The supply and demand imbalance in both Abu Dhabi and Dubai continues to push rental prices higher. Many global and international retail brands are keen to establish or expand their presence in Dubai’s prime locations, despite the limited availability of quality stock and high occupancy levels.
Tenants in both cities are on the lookout for high-quality retail spaces, particularly in prime locations. However, there isn’t enough available stock to meet this demand. This shortage of quality assets is driving rental growth but also putting pressure on new market activity. The scarcity of upcoming developments adds to this challenge.
The industrial market is also experiencing robust demand. In the first quarter, industrial rents in Abu Dhabi and Dubai rose by 5.1% and 14.3%, respectively. Several new developments are scheduled for completion this year, but these are unlikely to lower rental rates.
High Demand From Foreign Brands
Foreign retail brands are eager to enter the markets in Dubai and Abu Dhabi. This trend is contributing significantly to the rise in retail rents. These brands are particularly interested in Dubai’s core locations. The limited availability of high-quality retail spaces is a challenge, yet it hasn’t deterred these brands from making their move.
The food and beverage industry is another key player driving up demand for retail spaces. As more restaurants and cafes look to establish themselves in prime locations, the competition for available spaces increases, pushing rents even higher.
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Limited Availability Of Quality Stock
One of the main issues causing the surge in retail rents is the limited availability of quality retail spaces. There simply aren’t enough high-quality assets to meet the demand from both local and international tenants. This shortage is particularly acute in prime locations, where many businesses want to be.
The lack of new developments coming onto the market exacerbates this issue. Without new high-quality retail spaces being built, the existing stock becomes even more valuable, driving up rental prices.
Strong Rental Growth Expected To Continue
Given the current trends, rental growth in Dubai and Abu Dhabi is expected to continue. The high levels of demand, coupled with the limited availability of quality retail spaces, suggest that rents will keep rising. However, this could also put pressure on new market activity, as businesses may find it challenging to secure the spaces they need.
Industrial Market Growth
The industrial market in both cities is also seeing strong demand. In the first quarter, industrial rents rose significantly in both Abu Dhabi and Dubai. Despite several new developments scheduled for completion this year, rental rates are expected to remain high.
The demand for industrial spaces is robust, and the new developments are not expected to be enough to lower rents.
Impact On Businesses
The rising rents in Dubai and Abu Dhabi are having a significant impact on businesses. For those looking to enter these markets, the high rental costs can be a major hurdle. Even established businesses may find it challenging to expand or relocate due to the high costs associated with prime retail spaces.
However, for landlords and property owners, this trend is positive. The high demand and rising rents mean higher returns on their investments. Property owners with high-quality assets in prime locations are in a particularly strong position.
Looking Ahead
As the retail and industrial markets in Dubai and Abu Dhabi continue to grow, the demand for quality spaces is likely to remain high. This will likely keep pushing rents up in the coming months. Businesses looking to enter these markets will need to be prepared for the high costs associated with securing prime retail and industrial spaces.
For those already operating in these cities, it may be a good time to consider the benefits of renewing leases or securing additional space before rents rise further.
The current trends suggest that the market will continue to favor landlords and property owners, with high demand and limited supply driving strong rental growth.
Arshad Darbar Thought
Arshad Darbar, a seasoned professional in the real estate market, shares his insights on the recent surge in retail rents in Dubai and Abu Dhabi. According to Darbar, the increase in rents is a reflection of the high demand and limited supply of quality retail spaces.
He notes that foreign brands entering the market and the thriving food and beverage industry are key drivers of this trend.
Darbar also highlights the challenge businesses face in securing prime locations due to the scarcity of available stock. He believes that while the rising rents benefit property owners, they pose a significant hurdle for new and expanding businesses.
Despite these challenges, Darbar remains optimistic about the market’s potential for growth, suggesting that strategic planning and timely investments are crucial for navigating the evolving landscape.
Conclusion
The retail and industrial markets in Dubai and Abu Dhabi are experiencing significant growth, with rents rising sharply in recent months.
High demand from foreign brands and the food and beverage industry, coupled with a limited supply of quality retail spaces, are driving this trend. Industrial rents are also on the rise, with strong demand expected to keep rates high.
Businesses looking to enter or expand in these markets will need to navigate the challenges of high rental costs and limited availability of prime spaces. Meanwhile, landlords and property owners are likely to benefit from the ongoing demand and rising rents.
As the markets continue to evolve, staying informed about these trends will be crucial for making strategic business decisions.
Whether you’re a tenant looking for space or a landlord managing properties, understanding the dynamics of the retail and industrial markets in Dubai and Abu Dhabi will be key to success.
