The UAE’s commercial real estate sector remains among the strongest globally, but higher borrowing costs could temper its outlook in the short to medium term, according to an industry survey. 

The Royal Institution of Chartered Surveyors (RICS) said two-thirds of the respondents polled in its latest quarterly survey feel the market is on the rise in the UAE, bucking the global trend. As such, expectations for rental and capital value growth remain firmly positive for the year ahead. 

“The UAE’s commercial property market remains among the strongest both regionally and globally,” RICS said on Thursday. 

During the fourth quarter of 2022, there were more customers looking to rent commercial space across all sectors in the UAE, with a net balance of +54% of respondents citing higher tenant demand, up from +47% in the third quarter, and among the highest in any country tracked by RICS. 

The market also saw strong growth in foreign buyer interest, which posted a net balance of +53%, slightly ahead of the UAE’s neighbour Saudi Arabia. 

“The short to medium-term outlook is strong, however this may be tempered by growing finance costs and compounding demand and supply imbalances further into the future,” RICS said. 

“Sentiments in Dubai reflect the strong conditions of the market, however there is some concern that its popularity for foreign investors risks oversaturation in the next few years.” 

Overall, RICS noted, the commercial property market is still poised to weather storms which might head in from the global economy in the future. 

Demand for commercial property in the UAE has rebounded since COVID-19 restrictions eased, driven by improved investor sentiment, higher tenant demand and business-friendly government initiatives.  

“An improved business climate in Dubai’s commercial real estate sector has prompted significant growth over the past quarter and we have witnessed higher demand from investor post-pandemic,” brokerage firm Commercial Real Estate Consultants (CRC) said in its report in November. 

“A combination of new company licenses hitting an all-time high in Q3 2022 and existing companies moving to more prestigious locations meant the commercial market reaped the benefits,” CRC said. 

(Writing by Cleofe Maceda; editing by Seban Scaria)