"The Center": Real estate market in Kuwait and the Gulf will remain stable in the second half
Kuwait Finance House (KFH) has released its latest report on real estate sector outlook for the second half of 2026, providing a comprehensive analysis of real estate market performance in Kuwait, Saudi Arabia, and the UAE.
The report reviews the performance of the real estate markets in the three countries during the first half of the year. It also assesses key trends expected to influence activity in the remaining period of the year. It notes that geopolitical tensions, rising construction costs, and tighter financing conditions have contributed to a slowdown in momentum across Gulf real estate markets, although their fundamental resilience remains intact.
KFH expects Gulf real estate markets to remain in a phase of stability during the second half of the year, supported by strong macroeconomic indicators, despite a slowdown in momentum compared to the first half of the year. It anticipates that government policies, infrastructure investments, population growth, and economic diversification efforts will continue to support long-term demand. Office, industrial, and logistics assets are likely to be among the best-performing sectors across the region.
The report noted that the Kuwaiti real estate market maintained its stability in the first half of the year despite a slowdown in investment activity. The total value of real estate sales declined by 5.9 percent year-on-year, while the number of transactions rose by 1.7 percent, reflecting the continued strength of underlying demand in the market.
Residential transaction volumes also increased by 7.5 percent year-on-year, partly supported by government housing initiatives and a growing pipeline of planned residential projects, which include more than 140,000 units. Meanwhile, investment real estate continued to benefit from its role as a hedge against inflation amid regional uncertainty.
Looking ahead to the second half of the year, KFH expects the Kuwaiti market to maintain its stability, as reflected by its Real Estate Sector Index score of 3 out of 5. Housing reforms, regulations concerning vacant land, and investor establishment initiatives are expected to strengthen the market’s fundamentals in the long term, while the commercial and logistics sectors continue to benefit from strategic infrastructure projects. Commercial real estate sales rose by 34.4 percent year-on-year, indicating sustained demand in this sector.
The report indicated that the Saudi real estate market continues to offer attractive opportunities across key asset classes, supported by Vision 2030 initiatives, foreign ownership reforms, and ongoing demand driven by the regional headquarters program for global companies.
The Class A office market in Riyadh continued its strong performance, with occupancy rates stabilizing at around 98 percent and rents for premium offices rising by 5.5 percent year-on-year. This was bolstered by the relocation of more than 700 regional headquarters to the Kingdom, surpassing the target set under Vision 2030.
Industrial and logistics assets also maintained strong momentum, with industrial rents in key centers rising by 9.9 percent in Dammam and 5.3 percent in Jeddah. The sector continues to benefit from the reshaping of trade routes and the sustainability of non-oil economic activity. Meanwhile, the fundamentals of the retail sector remained strong, with rents in major regional shopping malls in Jeddah rising by 13 percent year-on-year, as experience-based destinations continued to attract consumer demand.
Based on these trends and the Center’s overall real estate sector index score of 3.3 out of 5, the report expects the Saudi real estate market to remain in a phase of stability in the second half of the year, with selective growth opportunities available within key asset classes. The residential sector is undergoing a phase of recalibration regarding affordability levels, while demand for rentals remains robust.
The report also anticipates that initiatives under Saudi Vision 2030, foreign ownership reforms, and demand generated by the Regional Headquarters Program will continue to support office and logistics assets. Grade A offices, logistics facilities, affordable housing projects, and tourism-related developments are likely to remain among the best-performing sectors.
The report considers the UAE real estate market to remain strong, despite a moderation in activity following recent regional geopolitical tensions, as the market transitions to a more balanced growth pace after an extended period of expansion.
It noted that Abu Dhabi continues to record healthy levels of demand; for instance, residential transaction values reached approximately AED 44 billion in the first quarter of 2026.
Office, industrial, and logistics assets remain among the best-performing sectors in the market. Prime office rents in Dubai rose by 17.2 percent year-on-year, coinciding with growth in Grade A and Grade B office rents by 19 percent and 23.4 percent, respectively.
Office occupancy rates in Abu Dhabi stood at 98 percent, while industrial rents grew by 18.2 percent in the emirate’s key industrial hubs, reflecting sustained tenant demand and continued investment in strategic sectors.
Looking ahead to the second half, and based on the Center’s overall real estate sector index score of 3.4 out of 5, the report expects the UAE real estate market to maintain its stability despite the moderation in activity. Ongoing reforms aimed at expanding foreign ownership and developing the industrial sector continue to enhance the long-term investment appeal of the UAE.
As Gulf real estate markets transition from a phase of rapid expansion to a more sustainable growth path, the report suggests that investors are increasingly shifting toward high-quality office assets, logistics facilities, and residential markets supported by structural demand drivers, rather than relying on broad-based market value increases.
Despite near-term geopolitical and macroeconomic challenges, strong economic fundamentals and government reforms in Kuwait, Saudi Arabia, and the UAE continue to bolster market resilience and long-term investment attractiveness.
