- Surging demand for prime inventory in Dubai push Grade A and B rents up by 26.2% and 31.5% respectively
- Abu Dhabi’s prime office space availability as low as 0.1% with overall average vacancy at just 1.4%
- Retail developers actively future-proof portfolios and align with evolving consumer preferences to prioritise tenant mix diversification
Dubai, UAE; August 2026 – The UAE’s commercial real estate sector demonstrated increasing maturity in the second quarter of 2026, with rapid rental escalations in a supply-constrained prime office market and a strategic pivot toward community-led retail formats, according to JLL’s latest Q2 market reports.
Despite global macroeconomic and geopolitical uncertainties, business confidence across Dubai and Abu Dhabi remained strong. Corporates continue to execute long-term real estate strategies, while proactive retail developers are successfully driving performance through deeper domestic consumer engagement.
Mouhammad Takieddin, CEO of Middle East and Africa at JLL said: “The sustained momentum despite regional volatility reveals the increasing maturity and agility in the UAE’s commercial real estate market. Quality upgrades and delivery pressures are shaping the pipeline dynamics in a highly supply-constrained office market, while retail developers, who are actively future-proofing their portfolios with a domestic-first strategy, are well-positioned to capture the most significant long-term value. Moving forward, the ability to rapidly align asset management strategies with these shifting occupier and consumer demands in an evolving landscape will be crucial in driving sustained portfolio performance.”
Demand for prime spaces drives the office market:
The UAE’s office market maintained strong momentum in Q2 with low vacancy levels and a growing appetite for flexible workspaces. Driven primarily by new contracts, Dubai’s rental contract registrations surged 24.6% year-on-year and 15.1% quarter-on-quarter.
Robust demand pushed citywide vacancy rate to 6.1%, down from 7.7% a year earlier. With prime inventory diminishing, tenants explored other alternatives, driving Grade B vacancy to drop to 8% from 10.9% and Grade C to 10.9% from 12.7% last year. Meanwhile, the upward pressure on rents due to limited prime stock pushed Grade B and Grade A rents up by 31.5% and 26.2% respectively, while Prime rents jumped 13.6%.
Abu Dhabi showcased a well-balanced market with stable growth. Sustained occupier commitment led to 5.4% growth annually in registrations and saw a 7.1% year-on-year surge in contract renewals. Overall vacancy remained highly constrained at 1.4%, and prime space availability was at a low 0.1%. This scarcity drove prime rental rates up 11.7% annually while Grade A and B rates recorded annual gains of 5.1% and 4.2% respectively. Looking ahead, the ‘Rent Freeze’ regulation implemented in June is expected to constrain short-to-medium-term rental escalations.
Abu Dhabi delivered 38,000 sq m of Grade A space in Q2, with 57,000 sq m in the pipeline. With select assets ceasing operations for strategic refurbishment to align with rising quality expectations, Dubai’s total stock stood at 100.6 million sq ft, with nearly 940,000 sq ft slated for completion by year-end.
Across both markets, flexible offices are expanding rapidly as the integration of AI and automation reshapes workforce requirements and businesses prioritiae agility. For occupiers, flexible spaces are a lower-risk market entry, given reduced barriers to entry, operational advantages and shorter lease commitments.
Structural shifts in retail:
Underlying market fundamentals remained steadfast in Dubai, where a surge in demand for secondary regional and smaller-format malls pushed the citywide vacancy rate to 4.7% in Q2, down from 8.0% a year earlier. Across the rental market, Dubai’s performance remained largely stable quarter-on-quarter while posting annual growth across all categories, with Super-Regional malls continuing to command the highest rental escelations, at 8.5% annually. Dubai’s retail leasing activity experienced modest softening, with annual contract volumes edging down by 0.2% and a steeper quarterly contraction of 14.2%, as retailers exercised caution amid reduced tourist footfall in Q2.
Abu Dhabi demonstrated resilient leasing activity with 4.4% annual growth in the total rental contract registrations, driven by both new contracts and renewals. While quarterly volumes slipped 2.5% due to softer renewal activity, the capital’s overall retail vacancy remained stable at 8.9% in Q2. Rental rates also displayed relative quarterly stability, but divergent annual trends highlighted a clear shift in consumer preferences. Here, community centers outperformed all other retail categories to register annual growth of 9.3%, underscoring the success of hyper-local retail strategies.
To sustain momentum across both markets, prospective tenants are increasingly negotiating for greater lease flexibility and enhanced capital expenditure (CapEx) contributions. In response, developers are actively repositioning their assets to build lasting, habitual customer relationships. Tenant-mix diversification is now a strategic priority, with a growing emphasis on experiential formats such as interactive kids’ entertainment zones and innovative food halls that are highly effective at driving footfall and extending visitor dwell times.
Marketing strategies have also matured in both markets. By pivoting away from short-term promotions and focusing on cost-effective mass awareness campaigns that engage domestic audiences, developers are successfully reinforcing the long-term resilience of a domestically anchored retail model.
About JLL:
JLL (NYSE: JLL) is a leading global commercial real estate services and investment management company with annual revenue of $26.1 billion, operations in over 80 countries and a global workforce of more than 113,000 as of December 31, 2025. For over 200 years, clients have trusted JLL, a Fortune 500® company, to help them confidently buy, build, occupy, manage and invest across a variety of industries and property types, including office, industrial, hotel, multi-family, retail and data centre properties. Driven by our purpose to shape the future of real estate for a better world, we help our clients, people and communities SEE A BRIGHTER WAY. Powered by rich global datasets and leading technology capabilities, we provide coordinated, end-to-end delivery of real estate services for a broad range of global clients who represent a wide variety of industries. Through LaSalle Investment Management, we invest for clients on a global basis in both private assets and publicly traded real estate securities.
About JLL MEA:
Across the Middle East and Africa MEA JLL is a leading player in the real estate and hospitality services markets. The firm has worked in 35 countries across the region and employs over 1800 internationally qualified professionals across its offices in Dubai, Abu Dhabi, Riyadh, Jeddah, Al Khobar, Cairo, Casablanca, Cape Town, Johannesburg and Nairobi.
