CBRE Report Points to Strong 2023 Growth in CBRE’s UAE Real Estate Sector Driven by High Demand and Restricted Supply

Real estate advisory firm CBRE foresees that the robust demand and limited supply in crucial segments will uphold a favorable projection for the UAE’s real estate industry throughout 2023. This insight is gleaned from the mid-year review of CBRE’s UAE Real Estate Market Outlook.

The report highlights that prevailing global economic challenges, characterized by stricter monetary policies and sustained inflation in major economies, have resulted in downward revisions of global and UAE GDP growth predictions.

UAE Economy

At the onset of the year, the anticipation was for the UAE’s economy to expand by 3.5 percent; however, the most recent projection has revised this figure to 2.2 percent.

This adjustment in the forecast is primarily attributed to the projected contraction in the UAE’s hydrocarbon sector, which is now anticipated to shrink by 3.3 percent. This contrasts with the initial expectation of 2.7 percent growth in January.

Conversely, the non-hydrocarbon sector is presently envisaged to achieve a growth of 4.2 percent in 2023. This marks an enhancement from the earlier estimation of 3.9 percent growth.

In spite of the hydrocarbon sector’s weaker performance than initially foreseen and the anticipated prolonged cycle of interest rates, which might influence demand, CBRE is upholding the majority of its prognoses made at the commencement of 2023.

Key Points from CBRE’s UAE Real Estate 2023 Market Outlook Mid-Year Review

  1. Robust Demand vs. Limited Supply – The report underscores the dynamic of robust demand in the UAE’s real estate sector juxtaposed with a constrained supply. This interplay continues to shape the market landscape, driving various segments towards positive growth trajectories.
  1. Economic Adjustment – CBRE’s UAE Real Estate report acknowledges the economic adjustments that have impacted the UAE’s GDP growth projection. The initial anticipation of a 3.5 percent expansion has been revised down to 2.2 percent due to factors including the projected contraction in the hydrocarbon sector.
  1. Hydrocarbon Sector Contraction – The review highlights the projected contraction of the UAE’s hydrocarbon sector by 3.3 percent, a significant deviation from the earlier projected growth of 2.7 percent. This shift has contributed to the recalibration of overall economic expectations.
  1. Non-Hydrocarbon Sector Growth – On a positive note, the non-hydrocarbon sector’s growth outlook has improved. The forecast now indicates an estimated growth rate of 4.2 percent, up from the previous estimation of 3.9 percent. This signals the resilience and diversification of the UAE’s economy beyond its traditional industries.
  1. Prolonged Rate Cycle – The report takes into account the anticipated prolonged cycle of interest rates, which might impact overall demand within the real estate sector. Despite this challenge, CBRE maintains its earlier forecasts for various market segments.
  1. Steadfast Forecasts – CBRE’s UAE Real Estate continued confidence in its initial forecasts, despite economic adjustments, underscores its comprehensive understanding of the UAE real estate market. This confidence resonates with the agency’s commitment to providing reliable insights to stakeholders.
  1. Non-Hydrocarbon Sector Momentum – With the non-hydrocarbon sector poised for enhanced growth, CBRE’s UAE Real Estate report signals potential investment opportunities in industries beyond the traditional hydrocarbon focus. The diversification of the UAE’s economy is a pivotal factor in shaping the real estate market’s trajectory.
  1. Evolving Market Dynamics – The review identifies the evolving dynamics of the UAE real estate market. The interplay of economic shifts, demand trends, and regulatory changes underscores the need for comprehensive analysis and forward-thinking strategies.

Occupancy rates have surged at a more rapid pace than initially anticipated, resulting in a notable 3.6 percent increase in Revenue Per Available Room (RevPAR) during the same aforementioned period, as observed by CBRE. This remarkable performance, surpassing expectations, can be attributed in part to the resumption of the European tourism market.

Capitalizing on the UAE’s status as a pivotal hub, tourists are opting for intercontinental breaks, influenced by both choice and external factors. This trend has provided a robust foundation for enhanced performance. Consequently, there is a heightened demand and profitability, even during what is traditionally considered the commencement of the low season.

While the upscale beachfront segment of the market has not matched the broader industry in terms of occupancy, Average Daily Rates (ADRs), and RevPAR, the outlook has shifted. CBRE no longer anticipates a decline in ADRs, indicating a positive trajectory for RevPAR performance throughout the year.

Taimur Khan, Dubai’s Head of Research for the MENA region at CBRE, shares insights –

“The year 2023 is largely aligning with our projected market performance. Despite certain global economic apprehensions, the shortage of supply in crucial commercial sectors like industrial and logistics, office spaces, and specific segments within the retail domain has been a pivotal factor bolstering robust performance.

The persistence of demand escalation within the residential sector has been a notable development. However, it’s important to note that our perspective maintains that the pace of price growth will likely ease by the end of the year. Nonetheless, a positive trajectory is anticipated.”

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