Dubai – Current market conditions in Dubai have increased the prevalence of tenants to renew residential leases, creating a bifurcation between new and renewed rental rates, according to the company’s latest Dubai Rental Report 2023.

In this report, CBRE has undertaken a detailed analysis to determine recent trends of new and existing leases and provide an outlook on the future direction of the Dubai residential market, analysing close to 703,000 residential rental transactions between January 2018 and July 2023, split between apartments and villas.

Dubai’s rental market has witnessed a significant increase in rents and activity in the past two years, ending the negative growth cycle that began in mid-2015 and lasted until late 2021. Data from the Dubai Land Department revealed that in the year to date to July 2023, the total number of tenancy contracts reached a total of 325,727, a 43.5% increase from the 227,011 contracts registered in the same period in 2019.

Such has been the scale of the resurgence that average apartment rents in Dubai have reached their highest levels since February 2017 and average villa rents are the highest on record. More so, rents are continuing to grow, where, in the year to July 2023, we have seen average rents increase by 22.0%, although this rate has moderated throughout the year to date.

However, delving below the headline figures, we see significant fragmentation within the rental market currently taking place. First, the total number of new contracts registered dropped by 12.6%, while renewed registrations grew by 29.0%. This indicates that tenants are less willing to relocate to prevent the additional costs emerging from acquiring new leases, particularly in prime and core residential areas while taking advantage of the protection provided by the RERA rental regulations. These new regulations seek to limit the annual rental increase permitted to a maximum of 20.0%, while the likelihood of achieving the highest rate of increase is rare in most cases.

Taimur Khan, Head of Research – MENA at CBRE in Dubai, comments: “The surge in demand has substantially changed the market dynamics in Dubai’s residential rental market, where given the much more landlord-favoured market, we are seeing new rental contracts able to achieve significant premiums to renewed contracts. Whilst this is now beginning to dissipate in the apartment segment of the market as affordability parameters are tested and renewals begin to catch up with market rents, in the villa segment of the market the significant disparity between demand and supply means the premiums achieved in this segment are likely to remain higher for longer.”    

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CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2022 revenue). The company has approximately 115,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.