JLL: UAE Commercial Real Estate Sees Growth Amid Tight Supply in Q2 2025

Dubai, UAE – September 11, 2025 - The UAE’s commercial real estate sector experienced strong growth in the second quarter of 2025, driven by limited availability in prime office spaces and shifting trends in the retail segment. According to JLL’s latest Office and Retail Market Dynamics reports, both Dubai and Abu Dhabi remain firmly positioned as landlord-favorable markets, with rising rental rates and robust demand across key asset classes.

Dynamic Shifts Across Commercial Real Estate

Dana Williamson, Head of Offices, Business Space & Retail, MEA at JLL, said the sector is undergoing a period of rapid transformation.

“The UAE’s commercial market is undergoing dynamic shifts, fueled by changing consumer and end-user expectations, which are driving growth and unlocking new avenues for investment,” she said. “While supply-demand imbalances in the Offices sector continue to exert downward pressure on rental values, demand for prime, strategically located office spaces remains strong, underscoring the ongoing ‘flight to quality.’ In the Retail sector, the rising emphasis on immersive and differentiated consumer experiences is creating fertile ground for the emergence of innovative concepts and evolving trends.”

Office Market: Limited Stock, Rising Rents

Both Dubai and Abu Dhabi’s office markets remain under pressure due to tight supply. In Abu Dhabi, prime office rents climbed to $790 (AED 2,905) per sq. m per year, representing a 31.5% year-on-year increase. Grade A rents rose by 7.8%, while Grade B rents increased by 10.9%.

Dubai’s office sector also recorded strong growth. Prime rents increased by 17.3%, Grade A rents by 19.5%, Grade B rents by 16%, and Grade C rents by 22.9%. The gap between prime and Grade A spaces widened significantly, with prime office rents now 73.3% higher than Grade A in Abu Dhabi and 50.8% higher in Dubai.

This surge is fueled by extremely low vacancy rates. In Abu Dhabi, the citywide vacancy rate fell to just 1.5%, with prime space at 0.1% and Grade A at 1.7%. Dubai also recorded a tight market, with citywide vacancies at 7.7% and prime vacancies at only 0.3%.

The imbalance between supply and demand has slightly affected leasing activity. Year-on-year, the total volume of registered leases fell by 1.9% in Abu Dhabi and by 19.1% in Dubai. This has prompted tenants to renew leases earlier, with renewal activity growing by 0.8% in Abu Dhabi and 8.3% in Dubai.

Retail Market: Rising Rents and Shifting Preferences

The UAE’s retail sector continues to adapt to evolving consumer preferences and high demand for prime locations. With limited availability and rising rents, the market remains favorable to landlords in the short to medium term.

Abu Dhabi saw a 12.1% decline in rental contract registrations as new market entrants explored secondary locations to avoid premium pricing. In contrast, Dubai recorded a 9% year-on-year increase in retail contracts, driven by an 11.9% rise in renewals and a 2.3% increase in new agreements.

Vacancy rates reflect the strength of the retail market. In Abu Dhabi, citywide vacancies dropped to 9% in Q2 2025, while Dubai reported a rate of 7.5%, with performance varying by property type. Prime super regional rents also rose sharply, with Abu Dhabi up by 3.4% to $1,504 (AED 5,524) per sq. m, while Dubai surged by 15.1% to $225 (AED 826) per sq. ft.

The total retail inventory across both cities stands at 8.13 million sq. m., with an additional 98,000 sq. m. expected by year-end.

Technology and Experience Driving Retail Evolution

Retailers in the UAE are increasingly integrating data analytics and advanced technologies to deliver personalized shopping experiences. Physical stores are being reimagined as experiential destinations, where consumers engage with brands in innovative ways.

One of the most notable trends is the transformation of traditional food courts into family entertainment zones with a broader mix of casual and upper-casual dining options. The F&B sector has been expanding its footprint to meet the rising demand for homegrown concepts and enhanced dining experiences.

Another key development is the rise of e-commerce brands establishing physical stores that function as both showrooms and micro-fulfillment centers. These hybrid spaces allow customers to interact with products directly while enabling faster local deliveries and convenient pickup services.

Continued Growth Amid Supply Constraints

With demand continuing to outpace supply, JLL expects both the office and retail sectors in Dubai and Abu Dhabi to maintain their landlord-favorable dynamics in the coming quarters. Tenants will increasingly seek secondary locations and earlier lease renewals as landlords capitalize on limited stock and sustained rental growth.