Winners and losers: How regional tensions are redrawing UAE real estate
Dubai property’s sector saw off-plan sales increase 9.5 per cent year-on-year, while secondary market sales fell 8.2 per cent, JLL said
02 June, 2026
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The UAE’s real estate market showed diverging trends in Q1 2026 as regional disruptions weighed heavily on hospitality, while residential and industrial sectors demonstrated resilience, according to a report released by property consultancy JLL.
The report said recent geopolitical tensions affected transaction activity across the country’s property market, although strong underlying demand and investor confidence continued to support key sectors.
“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,” said Taimur Khan, head of Research, Middle East and Africa at JLL.
“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.”
In the residential sector, Dubai experienced a sharp initial slowdown, with weekly transaction values declining by nearly 50 per cent following the onset of geopolitical tensions before moderating and showing resilience.
Dubai’s off-plan residential market outperformed the secondary market during the quarter. Off-plan sales increased 9.5 per cent year-on-year, while secondary market sales fell 8.2 per cent.
In Abu Dhabi, new project launches pushed transaction volumes to more than double year-on-year during the first quarter, despite an 11.8 per cent decline in transactions recorded in March.
Residential prices in Dubai continued to rise, although annual appreciation moderated to between 8 per cent and 12 per cent, compared with 16 per cent to 19 per cent previously.
JLL said investor-focused properties were facing greater pricing pressure than owner-occupier stock.
Rental activity
Rental activity reflected increased caution among tenants. In Abu Dhabi, total registrations fell 8.4 per cent, although new contracts rose 13.4 per cent as tenants relocated in search of better terms.
Dubai’s registrations remained broadly stable during the quarter but fell 19.7 per cent in March as tenants became more reluctant to commit to long-term leases.
JLL forecasts around 59,000 residential units will be delivered across Abu Dhabi and Dubai during the remainder of 2026, with nearly 92,000 additional units expected in 2027, although supply chain disruptions could affect delivery schedules.
Hospitality hit hard
The hospitality sector faced the strongest headwinds as regional tensions and disruptions to air connectivity affected travel demand.
According to the report, daily UAE flight volumes had nearly halved by the end of the first quarter compared with levels before the disruptions in late February.
The country’s hotels recorded weaker performance as a result. Dubai’s occupancy rate fell by 39.4 percentage points in March compared with the same month a year earlier, while revenue per available room (RevPAR) declined 65.6 per cent.
Nationally, RevPAR declined 10.8 per cent, with Dubai recording the largest drop at 12.4 per cent. Ras Al Khaimah showed relative resilience in average daily rates (ADR), posting an 11 per cent year-on-year increase in March despite a 36.3 percentage point decline in occupancy.
JLL said the services sector, particularly hotels and restaurants, is forecast to contract by 10.8 per cent year-on-year during the adjustment period.
Development activity in hospitality remained active, with major projects continuing to progress and investors refining strategies, including delaying some openings until conditions stabilise.
Incentives to support sectors
The UAE government’s Dhs1bn economic incentives package has helped support hotel liquidity through fee deferrals, while operators have sought to offset lower occupancy by accelerating renovations and promoting domestic staycation offers.
The industrial and logistics sector remained one of the strongest performers.
Dubai’s industrial market recorded rental growth of 12.8 year-on-year in the first quarter, with average rents reaching Dhs48 per square foot. Abu Dhabi achieved rental growth of 18.2 per cent, with average rents reaching Dhs486 per square metre.
Rental contract renewals in Dubai rose 3.4 per cent during the quarter, indicating continued tenant confidence, although new leasing transactions fell 9.1 per cent as some occupiers reassessed expansion plans.
JLL said demand linked to essential goods sectors, including food distribution, pharmaceuticals, medical supplies and critical commodities, is expected to remain strong despite ongoing uncertainties.
The report added that near-term performance is likely to vary between facilities serving essential goods and those focused on discretionary or export-dependent sectors.






















