Why you should invest in Dubai’s commercial property market
The emirate is becoming one of the most sought-after global destinations for commercial investments – let’s look at the reasons.
While Dubai’s real estate market overall is on an incredible upward trajectory – and attracting investor interest from around the world – the commercial market is having its own moment in the sun (literally), seeing a remarkable recovery since the pandemic.
The Dubai Land Department (DLD) has highlighted impressive growth over the past 12 months, with total sales transactions increasing by 3% – rising from 2,844 in Q1 2023 to 2,918 in Q1 2024. The total value of these transactions surged by 16%, from AED 19.295 billion to a huge AED 22.328 billion.
The office and retail sectors have been major drivers of this growth. Office transactions rose by 8% compared to Q1 2023, while retail transactions saw a significant 23% increase.
It’s clear that the emirate’s strategic location and business friendly policies have created a perfect blend of opportunities for entrepreneurs and investors.
As Gary Stevenson, Commercial Manager at haus & haus says: “During my time in Dubai, I have witnessed firsthand the incredible growth and dynamism of its commercial sector. There are unparalleled advantages for businesses, whether you’re looking to start a new venture or expand an existing one – Dubai provides fertile ground for growth and success. With return on investment at an all-time high and significant capital appreciation, now is the perfect time for investors to consider entering this thriving market.”
Let’s delve a little deeper into the sector.
What is commercial property investment?
Commercial property investment involves purchasing real estate for business use, such as office buildings, retail spaces, warehouses, and multifamily apartment buildings. Investors seek higher returns through leasing to businesses.
Key benefits include higher rental income, longer lease terms, capital appreciation, portfolio diversification, stable rental income from professional tenants, and tax benefits like depreciation and interest deductions.
Why invest in commercial property in Dubai?
Looking at it from almost every angle, Dubai offers a very attractive corporate environment – that’s why its reputation as a global business hub continues to strengthen, with the UAE ranked third among 52 nations for launching a startup in 2024 by Business Name Generator.
At the same time, setting up a business is a piece of cake compared to many other places – often taking just four days to complete the legal process. This rapid timeline significantly reduces entry barriers, allowing entrepreneurs to focus on business growth rather than bureaucratic hurdles.
Then there’s the fact that Dubai’s commercial property market offers an average ROI of 10-15%, far outpacing residential investments. By 2024, the market is expected to reach a value of US $307.10 billion, with a steady annual growth rate of 3.01% from 2024-2028. By 2028, the market volume is projected to rise to $345.80 billion, showcasing a strong growth trajectory.
Last – and by no means least – Dubai has seriously competitive tax rates. In fact, the emirate’s corporate tax rate of 9% is among the lowest globally, enhancing its attractiveness for businesses aiming to maximise profitability. This low tax burden is particularly beneficial for startups and SMEs, creating a great environment for business growth and investment.
What are the top commercial investment areas?
Business Bay led office transactions in early 2024, followed by Jumeirah Lake Towers, while Jumeirah Village Circle (JVC) and Silicon Oasis tied for third.
The pros and cons of investing in Dubai office space
When it comes to investing in Dubai office spaces here are the pros and cons.
Pros…
High rental yields: Dubai offers some of the world’s highest rental yields, averaging around 7%.
Premium locations: Grade A office spaces in prime areas like Business Bay, City Walk, and DIFC command premium values.
Cons…
Limited availability: Grade A office space is currently scarce, leading to high demand and premium prices.
Location tradeoffs: Reasonably priced office spaces exist in submarkets, but they may lack the central, stylish appeal of prime districts.
What are the pros and cons of investing in Dubai retail space?
When it comes to investing in Dubai retail spaces there are also a couple of things to consider.
Robust population growth: The huge influx of local and international residents is driving demand for Dubai retail properties.
But limited availability: Prime retail spaces are also scarce, leading to high demand and premium prices.
Growing opportunities in Dubai’s industrial property market
Meanwhile, Dubai’s industrial property market is also taking off, driven by factors such as the e-commerce boom which has increased demand for warehousing and distribution spaces, ensuring stable rental income.
Plenty of food for thought for those eyeing the market.
Got more questions about investing in commercial real estate in Dubai?
