Dubai’s Commercial Property Boom Faces Legal Test That Could Shape Investor Sentiment
Dubai’s commercial real estate market is in the midst of a record-breaking phase. In the first half of 2025, the Dubai Land Department (DLD) reported AED 431 billion (US $117 billion) in total real estate transactions—marking a 25% year-on-year increase. Commercial property is a key driver of this surge. In the second quarter alone, sales in the commercial segment touched AED 31 billion, reflecting a 50% jump compared to the same period last year.
Investor appetite remains robust, particularly from overseas – Indian capital leading the charts once again followed by British, Chinese, Saudi, and Russian buyers. The appeal is straightforward: Dubai offers high rental yields, relative ease of doing business, investor-friendly visa reforms, and long-term urban planning under frameworks such as the Dubai 2040 Urban Master Plan.
Yet, even amid this optimism, a growing number of global investors are sceptical about the implementation of tenancy laws—an area where enhanced transparency could further boost market confidence.
Clear Laws, Uneven Outcomes
Dubai’s tenancy laws—under Law No. 26 of 2007 and its 2008 amendment—clearly define the conditions under which landlords can reclaim leased property, including for sale, self-occupation, or redevelopment, which are possible only after expiry of contractual lease period. The process requires a 12-month advance notice, delivered via notary or registered post.
On paper, the process is clear. In practice, however, many institutional and private investors report that outcomes in some cases appear inconsistent — particularly when tenants hold strong local influence or relationships. While such cases may be exceptions rather than the norm, even the perception of unevenness can introduce hesitation amongst investors.
In few recent cases, landlords who issued legally valid eviction notices upon expiry of leases have faced resistance from tenants who are paying rentals well below the market rates. For instance, tenants paying AED 100 per square foot have declined to vacate even when the prevailing market rent stands at AED 250 per square foot. Some offer a partial increase—say 60% over their old rent for lease renewals—but that still falls significantly short of prevailing market levels.
For investors who priced the acquisition of a big-ticket assets based on achieving full market rental income after expiry of existing leases, such disruptions can materially erode the expected return on investment.
Institutional Capital Is Growing—But Confidence Hinges on Legal Certainty
In recent years, Dubai has increasingly succeeded in attracting global institutional capital. Landmark investments – such as Brookfield’s partnership with ICD at DIFC, and large-scale entries by firms like Apollo, Goldman Sachs and Hillhouse—reflect growing confidence in the market’s fundamentals. Private equity firms and sovereign wealth funds are also expanding their presence in Dubai, establishing dedicated teams focused on regional real estate and infrastructure.
This momentum could accelerate further if investors are reassured that legal rules—particularly those governing lease expiries—are applied transparently and consistently. For institutional capital, opportunity must be matched with predictability. Any inconsistency raises concerns about long-term risk. Dubai’s strong legal framework has long been one of its greatest advantages. Maintaining parity and transparency in enforcement will be critical to sustaining and expanding this new wave of structured capital inflows.
The issue, investors say, is not with the law itself but with the perceived inconsistency in implementation. If outcomes are seen to depend on influence or informal negotiations, it introduces an element of unpredictability that is particularly undesirable for institutional capital.
This unpredictability also poses broader risks for Dubai’s commercial real estate market:
- Reduced rental income may put downward pressure on asset valuations.
- Uncertainty in legal enforcement could tighten liquidity in full-building transactions.
- Dubai’s long-term competitiveness may depend on reinforcing legal transparency.
Dubai has built its success as a real estate destination on the promise of a transparent, rules-based environment. Investors know they are entering a regulated market, but they also expect that the law will be applied consistently, without favour or exception.
Market Feedback and the Path Forward
Market participants remain optimistic that these concerns will be addressed. Dubai has shown time and again its ability to listen, adapt, and lead—whether through reforms in property registration, escrow regulations, or foreign ownership laws. A continued focus on clarity and consistency in lease-related matters would not only strengthen investor sentiment but could unlock a fresh wave of long-term capital into the commercial sector.
Industry participants are not calling for a change in the law. Rather, they are urging authorities to ensure that the existing framework is implemented uniformly—regardless of the identity or connections of the tenant.
Some suggestions being discussed in investor circles include:
- Stronger clarity on post-expiry eviction enforcement, especially where legally valid notices have been served.
- More transparency at the time of sale, including clear disclosures of existing tenant contracts and any rent concessions.
- Discouragement of off-record negotiations that undermine the legal position of the landlord.
- Improved dispute resolution timelines, particularly for high-value commercial properties where delays can be costly.
Still a Strong Market—If Confidence Is Preserved
Dubai remains one of the most attractive global destinations for commercial property investment. Its ability to deliver high yields, attract international businesses, and maintain macroeconomic stability continues to set it apart.
However, global capital is sensitive not just to returns, but to the legal environment in which those returns are earned. Investors are increasingly clear that they are not seeking protection from risk—they simply want certainty around enforcement of rules, rights, and recourse.
To sustain its current momentum, Dubai can strengthen investor trust by ensuring that its well-crafted legal framework is implemented with clarity and consistency. This would help the city maintain its position as a regional leader—and set a global benchmark for transparent, large-scale real estate investments.