Stock Dubai Skyline
Selective buying is happening in the UAE's commercial real estate space, but offices could take longer to take the recovery path. Image Credit: Ahmed Ramzan/Gulf News

Dubai: Foreign investor interest is making a gradual return to the UAE’s commercial real estate space – and enough for the pessimism to subside.

But given the right asset in the right category, investors are making those commitments, as was the case with the Dh700 million deal by a UK based fund to acquire a luxury hotel in Dubai in December.

“Structural changes are still working their way through the sector – with demand for logistics and industrial space picking up pace, while retail and office continue to face an intensely challenging backdrop,” said Simon Rubinsohn, Chief Economist at RICS (Royal Institution of Chartered Surveyors).

“As COVID-19 continues to ravage the global economy, disrupt demand and accelerate socio-economic and technological trends, it’s no wonder that confidence in commercial property is fragile at best.”

Demand for offices is still on the wane, with a recent report stating that more than 20 per cent of recently completed office buildings in Dubai are vacant.

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Easing up

In the third quarter of 2020, 8 per cent of respondents from the UAE suggested that the market was in some stage of a downturn. However, between October to end December, that slipped to 79 per cent.

“This does represent a noticeable easing in negativity - also, more respondents believe that market is in the early stages of an upturn.” The RICS survey notes. But the nature of a future upturn for commercial real estate will be quite different.

“Setting aside the structural changes to demand we are seeing, our perception of buildings, their use, location and what constitutes value will be profoundly changed," said Paul Bagust, Global Property Standards Director, RICS.

What's hot.... and what's not
Domestic enquiries in the UAE for retail, office and industrial assets "fell once again".
However, respondents continue to point to early signs of foreign interest as the series improved for the second successive quarter, according to RICS.