• New project launches in Abu Dhabi drive transaction volumes to more than double year-on-year in Q1; total transactions fall 11.8% in March
  • In Dubai, hotel occupancy fell 39.4 percentage points and RevPAR declined 65.6% in March
  • In the industrial sector, rental growth in Abu Dhabi and Dubai achieved 18.2% and 12.8%, respectively, year-on-year to Q1 2026

Dubai, UAE – Key real estate sectors in the UAE followed divergent paths in the first quarter of the year amid regional disruptions, according to JLL’s latest Real Estate Market Dynamics Q1 2026 report. While the hospitality sector faced significant headwinds due to the immediate impact on air travel, the residential market proved resilient after an initial dip in transaction volumes, while the industrial sector also demonstrated strong market fundamentals with lower sensitivity to temporary disruptions. All sectors are now adapting to the evolving market conditions to position themselves for greater stability and sustained growth.

Taimur Khan, Head of Research, MEA, JLL, said: “The first quarter presented a clear divergence in the UAE's real estate market, with sharp challenges for hospitality and resilience in the living, industrial and logistics sector. While government incentives and agile strategies are easing the pressure in the short-term, strong market fundamentals and investor confidence position the wider economy for continued stability and a firm rebound as conditions normalise. This transition phase is a period of strategic adjustment, not a structural decline.”

Residential transaction volumes dip in Q1

In the UAE’s residential sector, the onset of recent geopolitical tensions impacted transaction activity, with weekly transaction values in Dubai initially declining by nearly 50% before moderating and showing resilience. 

In Dubai, a clear divergence was noted between the off-plan and secondary markets.  Off-plan sales saw a 9.5% increase, showing relative resilience, while secondary market sales fell by 8.2%. In Abu Dhabi, new project launches drove transaction volumes to more than double year-on-year in Q1, despite a transaction decline of 11.8% in March.

While residential prices in Dubai continued to show year-on-year growth, the pace of annual appreciation has moderated to 8-12%, down from 16-19%, indicating the market is gradually correcting from previous rapid appreciation cycles. Across the UAE, investor-focused stock is seeing greater pricing pressures compared to owner-occupier stock.

In the rental market, tenants responded to the uncertainty by seeking flexibility. In Abu Dhabi, while total registrations declined 8.4%, new contracts rose 13.4% as tenants relocated for better terms, rather than exiting the market. In Dubai, registrations were stable for the quarter, but a reluctance to commit to long-term leases led to a sharp drop of 19.7% in March.

Across Abu Dhabi and Dubai, a supply pipeline of around 59,000 units is forecast for the remainder of 2026. Forecasts for 2027 show nearly 92,000 new units, though supply chain disruptions could impact their timely delivery. Ultimately, stability in the region will be key to maintaining investor confidence and sustaining growth.

Hotel performance impacted from March 2026

After a strong start to the year, the onset of regional tensions and disruptions in air connectivity in late February nearly halved daily UAE flight volumes by the end of Q1, directly impacting hotel demand across both the leisure and business tourism segments. Consequently, the services sector, specifically hotels and restaurants, is forecast to contract by 10.8% year-on-year during this adjustment period.

Performance metrics reflected this impact, with Dubai experiencing the most pronounced declines in March, as occupancy fell by 39.4 percentage points and RevPAR declined 65.6% compared to March 2025. The country’s RevPAR decreased 10.8%, with Dubai recording the most significant decline of 12.4%. Ras Al Khaimah’s market demonstrated comparative ADR resilience with 11.0% year-on-year increase in March. This came despite a significant 36.3 percentage point drop in occupancy.

Development activity remained resilient, with major hospitality projects and modest inventory additions continuing in the pipeline. Investors are prudently refining strategies, with some deferring openings until market conditions stabilise, demonstrating a long-term commitment to the UAE.

The government’s AED 1 billion economic incentives package is supporting hotel liquidity through various fee deferrals. Hotels have also adopted dual strategies to navigate lower occupancy, including using property closures for accelerated renovations and offering competitive staycation packages to target domestic demand. These strategies position operators to emerge with enhanced asset quality and a more balanced demand profile as tourism recovery progresses. The sector is well-positioned to rebound as travel returns, given its strong fundamentals and sustained investor confidence.

Resilient growth despite headwinds in the industrial sector

Double-digit rental growth and positive contract renewal trends in Q1 2026 demonstrate the underlying demand for warehouse and logistics facilities even amid the current geopolitical backdrop. However, new leasing activity may moderate as regional trade flows normalise.

Dubai's industrial market recorded 12.8% rental growth year-on-year to Q1 2026, with average rates reaching AED 48 per sq ft, while Abu Dhabi achieved 18.2% growth with rents averaging AED 486 per sq m, reflecting sustained occupier demand and constrained supply. In response to emerging market uncertainties, some landlords are introducing lease flexibility to maintain transaction momentum and secure occupiers.

In Dubai, while rental contract renewals grew 3.4% in Q1, reflecting tenant confidence, new leasing transactions declined 9.1% as prospective occupiers reassessed expansion plans. 

Demand for industrial space serving essential goods sectors like food distribution, pharmaceuticals, medical supplies, and critical commodities is expected to maintain consistent strength. Consequently, a near-term performance divergence is anticipated between facilities serving essential goods and those concentrated in more discretionary or export-dependent sectors.

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. For further information, visit jll.com

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. For further information, visit jll-mena.com

Media Contact:
Medha Sandrasagara
JLL MEA
Medha.Sandrasagara@jll.com

Nisha Celina
Burson | nisha.celina@bursonglobal.com