Dubai retail rebounds while warehouses lead with 60% surge
Dubai’s commercial property market delivered a nuanced performance in the first half of 2025, as per a report by Cavendish Maxwell. The report, published in October 2025, showcases divergent trends between the retail and warehouse sectors.
While overall retail sales and rental activity softened year-on-year, specific segments, particularly the ready retail and warehousing, continued to show resilience, supported by shifting consumer behaviour, e-commerce growth, and strong demand for well-located logistics assets.
Dubai’s retail sector recorded approximately 500 sales transactions in the first half of 2025, with a total value of around AED 1.4 billion. However, these figures marked a year-on-year decline of 17.3 per cent in volume and 1.8 per cent in value, largely attributed to a notable slowdown in off-plan retail activity.
In contrast, the ready retail segment emerged as a bright spot. Sales volumes in this category grew by 13.2 per cent, while values surged by an impressive 40.1 per cent. This shift reflects investor and occupier preference for completed, income-generating assets amid a maturing retail market and evolving leasing dynamics.
Retail rentals
On the rental side, Dubai’s retail leasing market experienced a mixed trajectory. While rental contracts increased compared to the second half of 2024, they still posted a decline compared to the same period last year. This was primarily due to a slowdown in new leases, amid limited availability of high-quality retail space.
Renewal activity, however, gained significant momentum. Contract renewals rose by 37.8 per cent from the second half of 2024 and 1.9 per cent from H1 2024, as tenants opted to extend their current agreements rather than relocate to potentially less advantageous locations. This tenant behaviour reflects caution in an environment where rents are climbing and prime retail space remains scarce.
Retail rents in Dubai continued to rise, recording a citywide increase of 8.3 per cent over the past 12 months. However, growth was highly location-specific.
Prime retail destinations, such as malls, high-street retail zones, and tourist-heavy areas, benefited the most. Their strong footfall and superior commercial viability allowed landlords to command premium pricing. Meanwhile, tenants in lower-footfall or secondary areas showed more resistance to rate hikes. Many leveraged weaker demand conditions to negotiate more favourable lease terms or incentives.
This divergence has reinforced the importance of location and consumer access in determining rental performance.
Warehouse market
Dubai’s warehouse sector remained a standout performer in H1 2025, supported by surging demand from both new entrants and existing tenants. The city recorded around 8,600 warehouse rental transactions during the period – a 27.8 per cent increase from H2 2024 and a striking 59.9 per cent rise year-on-year.
The surge in activity is underpinned by Dubai’s continued role as a strategic logistics and distribution hub for the region. Strong fundamentals, including a thriving e-commerce market and resilient trade activity, have kept occupancy rates high across industrial assets.
Warehouse rents rose by 14.1 per cent over the past 12 months, though performance varied by location. Facilities with strong connectivity to key transport corridors, close proximity to ports and airports, and modern specifications saw the highest rental growth – ranging between 10 per cent and 20 per cent. Conversely, older or less strategically located properties recorded more moderate increases, often driven by spillover demand when prime assets were unavailable or exceeded tenant budgets.
With limited Grade A stock available in core locations, some occupiers have started exploring options in neighbouring emirates such as Abu Dhabi and the Northern Emirates, where larger and more affordable logistics spaces offer compelling alternatives.
Outlook for the second half of 2025
The outlook for Dubai’s retail and warehouse sectors remains cautiously optimistic heading into the second half of the year.
Retail occupancy remains strong. Key players such as Emaar and Majid Al Futtaim reported average occupancy rates of 98 per cent across their mall portfolios in H1 2025, signalling sustained tenant demand and healthy footfall. The sector also welcomed new supply with the opening of Nad Al Sheba Mall (500,000 sq. ft.), while Damac Mall (110,000 sq. ft.) is slated to launch in early H2 2025.
Retail demand is expected to remain resilient, supported by population growth and increasing tourist arrivals. However, the market is expected to remain landlord-driven, with rental trends continuing to vary by location. High-traffic areas will likely maintain upward pressure on rents, while more secondary markets could face pricing pressure or stability.
There is also a shift in the retail landscape towards experiential destinations. Emerging areas like Al Marmoom, Al Khawaneej, and Alserkal Avenue are redefining what retail means in Dubai, curating environments that offer unique cultural, dining, and community experiences rather than just commercial space. As Siraj Ahmed, Director and Head of Strategy and Consulting, observed, “Dubai’s next retail advantage lies in creating reasons for people to cross the city, not just relying on the surrounding catchment population.”
On the logistics front, the fundamentals remain solid. With e-commerce expected to continue expanding and international brands increasing their regional footprint, the demand for modern, well-located warehouses will likely remain high. In turn, rental growth may persist, especially in areas with strong infrastructure and transport links.
As Dubai continues to evolve as a global trade and retail hub, both sectors are poised for continued, but selective growth. Investors, tenants, and developers will need to adapt to changing consumer patterns, rising operational costs, and the ongoing push for quality and location advantage.
This article was originally published in Arabian Business.
