Investing In Dubai Property: Commercial vs Residential Real Estate

Choosing between investing in commercial or residential real estate is a daunting task, especially in a busy market like Dubai. Commercial and residential properties have various benefits worth spotting. The opportunities available for investing in these real estate options in Dubai are plentiful, but anyone planning on entering should note what to expect.

Investors in Dubai will often acquire these properties and rent them out to various parties, whether it entails finding businesses that will rent units or families looking for a spot to live. The desires people have for living or working in Dubai are plentiful, so finding the best investments in the region is essential. Dubai does allow foreign parties to buy or rent real estate in the area, so the competition for these two property choices will be fierce.

What Makes Commercial Real Estate Inviting?

Real estate investors will find many commercial property options in Dubai. Some of these spots include retail spaces, office areas, warehouses, worksites and labour camps, and many other choices.

The advantages of investing in commercial real estate in Dubai are appealing to investors:

  • Many commercial sites will have lengthy lease terms that can go for about five to ten years. These terms ensure turnover costs and vacancy rates are minimal. An investor will not risk a renter bailing on a lease too soon.
  • The revenue a commercial real estate site generates often influences its value. When a renter brings in more cash flow, the property value increases. It becomes easier for a property investor to make money off the spot when the renters succeed.
  • The property investor only has to pay mortgage costs in most situations. The tenant will handle real estate taxes and other property expenses, reducing the investor’s need to spend extra money.
  • Investors can also easily find renters, as many commercial tenants are tied to more massive business entities with the funds to cover the rent cost.

Is Commercial Real Estate Becoming More Popular?

The commercial real estate industry is growing in Dubai, as the industry has managed to recover from the global pandemic. The sales of office properties in Dubai doubled during the first eight months of 2021 versus 2020, plus prices are becoming stable.

The total amount of commercial sites for sale in Dubai has also been growing. The gross living area of office units in Dubai was around 9 million square metres in 2021, and hundreds of thousands more square metres are opening. New commercial sites are regularly appearing throughout Dubai, so the choices people have for investing in real estate in the region are growing.

Prospective investors will need to enter the market soon, as the potential for rental prices to drop is dwindling. Prices in Dubai have been around AED 1,000 per square foot. An average property will require about 80 square feet per person. Additional space for meeting rooms, a reception area, and other common commercial site features will also be necessary.

What About Residential Real Estate?

Residential real estate is another choice people have when investing in Dubai properties. Residential properties can include everything from single-family houses to penthouses to villas.

Residential real estate is often more accessible for investors for many reasons:

  • The cost to enter the market is often less than what people would spend on commercial sites. Since residential properties are smaller, a person often requires a single down payment to enter.
  • Investors might have an easier time finding long-term tenants for residential properties. This benefit works if a property owner screens prospective residents well enough.
  • The potential renter pool is higher for residential spots than commercial ones, giving investors more options for finding renters.
  • Residential properties are available through various values. For example, an investor could find a villa for AED 4 million or AED 21 million.

Is Residential Real Estate Becoming More Inviting?

Real estate properties in Dubai are more affordable than they were years earlier, with properties averaging about AED 1,200 or USD $320 per square foot. The total is lower than the AED 1,950 per square foot charged in 2008. But the price has been rebounding since 2020, so it will likely continue to increase over time.

The number of residential properties available in Dubai has also increased, with the total ballooning from about 205,000 residential units in 2005 to 550,000 units in 2017. The increase has only become more significant in recent years, as there were about 740,000 units in Dubai in 2022, plus about 45,000 new apartments and 7,000 villas were to be added in 2023 and beyond.

Investors can also explore properties in various sizes, with some spaces possibly being more affordable based on budget or rental needs. Penthouses of about 3,000 square feet are available throughout Dubai, while one-bedroom units at anywhere from 700 to 1,200 square feet can also work. Two and three-bedroom units are also available in sizes between those extremes, although the sizing standard will vary by property. Some standalone single-family houses may also be available, although it is easier to find them around the outskirts of Dubai than in the city centre.

Which Investment Option Is Right For You?

Real estate investors have many choices to explore when looking for properties in Dubai. Commercial properties are enticing, as the number of choices is increasing and more businesses are aiming to enter the Dubai market. The increased potential to find renters who can stick around for a while is appealing, and the fact those renters will cover many operational expenses in these properties also helps.

The choices open throughout Dubai include options of various sizes and with multiple purposes. Investors should review what properties are for sale in Dubai based on things like the location within the Dubai region, the size of the space, and any distinctive features in each spot. The choices people have are plentiful, but knowing what’s open and what to expect from the market is vital to one’s success.

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