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Middle East Real Estate Market Outlook 2023 Summary

Macroeconomic Outlook

GCC countries are projected to grow at 2.7% in 2023, driven by both hydrocarbon and non-hydrocarbon sectors. Inflation is expected to drop to 2.4%, close to historic averages. Employment growth is robust, averaging 1.9%, with Qatar facing a slight decline. Oil prices remain high at $86/pb, supporting regional economies and diversification efforts. The real estate project pipeline totals $1.36 trillion, with Saudi Arabia accounting for 64.5% and the UAE 21.6%.

Offices

Strong economic growth attracts occupiers, particularly to Saudi Arabia and UAE markets. Rental rates and occupancy are expected to rise in these key hubs due to constrained supply. In other markets, rental growth may remain anemic due to subdued demand and excess supply.

Residential

Residential markets show fragmented performance in 2023. Key hubs like Dubai and Riyadh are expected to outperform due to supply shortages, while other markets face performance drag from excess supply. Price growth is polarized in Saudi Arabia and the UAE, with Dubai and Riyadh leading.

Hotels

Post-pandemic recovery continues, with KPIs projected to surpass 2019 levels by year-end. Occupancy rates are improving across most GCC countries, supported by returning religious tourism and corporate travel. However, new supply and global economic factors pose challenges, especially in Bahrain's five-star sector.

Retail

The retail sector faces subdued performance due to excess supply and e-commerce growth. Occupancy is improving, with rental rates near bottoms in some areas. Dubai and Abu Dhabi may see rental convergence, with Abu Dhabi recovering from prolonged COVID restrictions. Secondary assets require capital expenditure for repositioning.

Industrial & Logistics

Demand consistently outstrips supply, leading to upward rental trajectories. Institutional grade stock may set new benchmarks, contributing to performance fragmentation. Key hubs like Abu Dhabi, Dubai, Riyadh, and Jeddah are expected to handle new supply without negatively impacting prices.

Investment Yields Guide

Yields are stable for most property types, with retail yields potentially expanding in the UAE. Rents are expected to continue their upward trend across all sectors due to strong fundamentals, supporting real estate as a key driver for economic diversification.