Strong macroeconomic fundamentals to steer Middle East and Africa real estate: JLL

Khaleej Times

18-03-2025

The Middle East and Africa (MEA) real estate market is projected to experience robust growth in 2025 and beyond, according to experts at JLL's Navigating Tomorrow's Real Estate event in Dubai. With the UAE predicted to see GDP growth of up to 6 per cent in 2026, followed by Saudi Arabia at 5.1 per cent and Egypt at 4.8 per cent, the region is proving to be a resilient and attractive investment destination.
This positive momentum is driven by many factors, including rapid economic diversification, transformative infrastructure projects, and a growing focus on digital connectivity. These trends, coupled with ongoing urbanisation and demographic shifts, create a dynamic landscape for property investment and development across MEA markets.
James Allan, CEO, Middle East and Africa (MEA), JLL, said: 'The MEA region possesses a unique blend of dynamic growth drivers, fuelled by government initiatives and strategic investments in infrastructure, diversification, and digital transformation that are setting the stage for long-term value creation in the real estate sector. While global challenges persist, the region's compelling narrative of growth and opportunity has earned the trust of savvy investors and is attracting capital from around the world.'
Highlighting several key trends in the region's real estate market during the event, analysts identified the limited supply of Prime and Grade A stock is expected to continue through 2025, but the increased private sector involvement and upcoming delivery of projects could marginally ease supply constraints, but this will likely be only from the medium term onwards. Key markets in the region are also becoming a lot more institutionalised, with Dubai standing out as a prime example of having experienced the busiest year on record for capital markets in 2024.
Beyond traditional offices, alternative assets are now driving real estate investment in the region, with developers beginning to integrate data centers and last-mile logistics spaces into their developments to meet evolving needs. Meanwhile, construction costs in the region are projected to remain elevated due to a surge in projects, with Saudi Arabia and the UAE forecast to see construction costs increase by 6 per cent and 3 per cent in 2025 respectively.
JLL experts acknowledged that while global economic policies and trade tariffs present potential headwinds, the sustained momentum of various macroeconomic indicators such as tight labour market conditions, low inflation, and reduced interest rates in many MEA markets will drive continued growth in the year ahead. This optimistic outlook is further bolstered by JLL's 'Future of Work 2024' survey, which reveals that 86 per cent of Middle East and North Africa (Mena) decision-makers prioritise organisational efficiency and revenue growth through expansion and M&A in the lead-up to 2030 while globally, the focus is on innovation and talent retention.
This focus on growth through footprint expansion and workplace transformation translates into significant opportunities for the commercial real estate (CRE) sector. The survey indicates that 88 per cent of decision-makers anticipate a rise in corporate revenues, with 80 per cent planning to increase their CRE budgets, encompassing spaces, amenities and technology, by 2030.
Speaking at a panel session in partnership with developers and occupiers, Dana Williamson, Head of Offices and Business Space leasing, Mena, said: 'In navigating the volatile MEA business environment, corporate real estate leaders are challenged with balancing short-term business strategies with long-term visions. Continuously shifting work patterns require agile portfolios and flexible location strategies, which are an innate challenge in the real estate industry. However, by embracing technology, data and an adaptable mindset, we can deliver maximum value to ensure a thriving future for corporate real estate in the region.'
The growing emphasis on in-office attendance has seen companies in the Mena region prioritise optimal office utilisation and invest in employee well-being. According to the survey, 60 per cent of companies plan to increase spending on design strategies that foster social connection and enhance the employee experience, while 56 per cent intend to invest more in central business district (CBD) locations by 2030. Furthermore, 43 per cent are willing to pay a premium to only occupy buildings with leading health and well-being credentials.
Looking ahead to 2030, the increasing integration of artificial intelligence (AI) is poised to revolutionise the real estate value chain. JLL predicts that up to 70 per cent of CRE activities could be significantly automated within the next five years, impacting areas such as project design and construction, sustainability strategy, renewable energy supply, facility management, and occupancy planning. While climate resilience and green credentials remain important, CRE leaders in the MENA region are expanding their Environmental, Social, and Governance (ESG) focus to encompass social value creation through real estate.
The MEA data centre market is experiencing rapid expansion, driven by the rise of 5G networks and the increasing adoption of AI, particularly for local language modelling. Projected to reach $9.61 billion by 2029, with a compound annual growth rate (CAGR) of 9.52 per cent, the sector is attracting significant investment. This growth is already evident in 2025, with accelerating demand for AI-powered data centers as AI applications proliferate across industries.
Government initiatives, such as Saudi Vision 2030 and 'We the UAE 2031' vision, are further bolstering the industry through tax incentives and the establishment of free zones. These programmes, coupled with efforts to promote data sovereignty and support smart city development, are catalysing substantial investments in the region's data centre landscape. The UAE is at the forefront of this expansion, with over $3.1 billion in awarded projects, followed by South Africa and Saudi Arabia. Public-private collaborations are also playing a key role in driving this growth.