According to JLL’s Real Estate Market Dynamics Q1 2026 report, key real estate sectors in the UAE followed divergent paths in the first quarter of the year, amid regional disruptions.
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.
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 showing resilience.
“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.”
Taimur Khan, Head of Research, MEA, JLL
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% to 12%, down from 16% to 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.
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% 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% year-on-year increase in March. This came despite a significant 36.3% point drop in occupancy.
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.
