Dubai's Developers Are Leaving Billions on the Table
Western markets cracked the code on institutional rental housing a decade ago. Dubai has superior demographics but refuses to see what's sitting in plain sight.
The UK build-to-rent sector crossed £5.2 billion in investment for 2024, marking its fifth consecutive record year. Meanwhile, the global coliving market hit $7.82 billion, with projections showing it will double to $16.05 billion by 2030. Coliving spaces in US urban markets are generating 40-50% more rental income than traditional apartments.
What about Dubai’s institutional multifamily and coliving investment?
The infrastructure simply isn’t there yet.
This isn’t about luxury towers or another statement development on the Palm. The gap is structural. Western markets have spent a decade building the infrastructure - the property management platforms, the standardised leases, the benchmarking data - that turns residential real estate from a speculative bet into an income-producing asset class. Dubai has the buildings. It doesn’t have the operating model, the capital structure, or, frankly, the recognition that this is even a distinct sector worth pursuing.
Lessons From Outside
The transformation of UK residential real estate into an institutional asset class didn’t happen because developers suddenly discovered people need places to live. It happened because investors realised that purpose-built rental housing, professionally managed at scale, behaves differently than a portfolio of individual buy-to-let units bought by amateur landlords.
The Numbers Tell the Story
European residential now represents 21% of total property investment, up from 8% in 2008. The UK has 126,000 operational build-to-rent homes with another 57,400 under construction. Germany averages €18 billion per year in multifamily investment. These aren’t scattered apartment purchases - they’re institutionally backed portfolios with professional management, standardised reporting, and performance data stretching back years.
The Economics Are Compelling
The economics explain why institutional capital has flooded into these markets. European residential is projected to deliver 7.7% annual returns through 2029, driven primarily by a 4% income yield and 3.1% rental growth. Coliving properties achieve 40-50% rental income premiums over traditional apartments. A Queensland coliving property generated 6.7% rental yield compared to 4.5% for conventional three-bedroom houses in the region.
These aren’t speculative plays. They’re cash-flowing assets with predictable income streams, defensible through economic cycles because people need somewhere to live regardless of GDP growth rates.
The Demographic Asymmetry Dubai Refuses to Acknowledge
Here’s where it gets interesting. Dubai arguably has better demographic fundamentals for institutional rental housing than most Western markets that are already scaling aggressively.
A Population Built for Rental
88.5% of the UAE population is expatriate. Nearly nine out of ten residents are temporary or semi-permanent, structurally unable or unwilling to purchase property. The UAE population is projected to peak at 10.71 million in 2033—a net increase of one person per minute. 88.1% urbanisation rate means this population growth concentrates in cities, creating the density that supports shared housing economics.
Dubai’s population continues to skew younger and more international than most Western cities. The target demographic for coliving in comparable markets—young, urban, transient, cost-conscious—represents roughly 640,000 individuals in the UK alone.
Rental Growth Outpacing the West
Dubai rents increased by up to 15% following the March 2024 RERA Rental Index update, with year-on-year increases of 19% in Q2 2024, well ahead of UK prime residential rent growth of 3.2% annually. Yet there’s minimal institutional capital deployed into purpose-built rental operations designed to capture this demand systematically.
The affordable housing pressure is real. Places like Jumeirah Village Circle and Dubai Silicon Oasis are seeing demand surges not because they’re aspirational, but because they’re what people can actually afford. Western markets responded to similar signals by building an entire institutional sector around middle-market rental housing. Dubai has yet to tap into this segment fully.
Why This Looks Nothing Like London or Berlin
The temptation will be to import proven Western models wholesale. That won’t work, and understanding why matters more than the opportunity itself.
Different Tenant Profiles
UK build-to-rent serves UK citizens with relatively stable employment and long-term connections to specific cities. Dubai serves a population where 88.5% are temporary residents with average stays of 2-3 years. The entire assumption set around tenant stability, lease terms, and investment horizons changes.
Regulatory and Financial Landscapes Diverge
Regulatory frameworks aren’t analogous. The rent-brake law (Mietpreisbremse) in Germany limits landlords to charging no more than 10% above local market comparative rent in tight housing markets. Dubai’s regulatory environment operates differently—more flexible in some ways, less established in others, and subject to change in ways that mature Western markets generally aren’t.
The financing landscape looks different too. European residential yields are projected to tighten by 30 basis points by 2029, supported by deep capital markets and institutional investor appetite for defensive assets generating current income. Dubai’s debt markets, while developed, don’t have the same depth or liquidity for residential projects, particularly rental-hold models that don’t generate upfront pre-sales to service construction financing.
The opportunity in Dubai requires adaptation, not imitation. The core insight from Western markets—that professionally managed rental housing at scale generates superior risk-adjusted returns compared to fragmented buy-to-let portfolios—transfers. The specific implementation details do not.
Structural Barriers
The reason Dubai doesn’t have a developed institutional rental sector isn’t lack of demand or capital. The barrier is that the entire development industry’s business model is built around pre-sales, not rental income.
The Pre-Sales Model Dominates
Developers in Dubai make money by selling units during construction, using those pre-sales to finance the project, and exiting before the building is complete. This model works brilliantly for what it’s designed to do—minimise developer risk, provide liquidity, and allow rapid capital recycling into new projects. It works terribly for building institutional-grade rental portfolios that require long-term hold strategies and professional management infrastructure.
Changing developer incentives from exit-focused to yield-focused capital allocation requires fundamentally rethinking how projects are financed and who bears the operational risk during lease-up and stabilisation periods.
Infrastructure Gaps
The Ejari system—Dubai’s tenancy registration platform—wasn’t designed with institutional operators managing thousands of units in mind. Property management in Dubai is professionalised for service delivery, not performance optimisation.
These aren’t insurmountable barriers. They’re just system-level challenges that won’t be solved by individual developers building one-off projects. The UK’s build-to-rent sector reached £5.2 billion in annual investment because the government, investors, and developers collectively built the institutional infrastructure to support it. Someone needs to do the same in Dubai, or the opportunity will eventually attract foreign capital that recognises what the local market refuses to make happen right now.
The Coliving Arbitrage That’s Sitting There
Within the broader opportunity around institutional multifamily, coliving represents the most compelling near-term play because it addresses Dubai’s specific market conditions better than traditional apartment models.
The Economic Logic
The majority of tenants globally are willing to pay extra for shared amenities, creating revenue streams not available in conventional residential. Yet 47% choose coliving primarily to reduce housing costs, meaning the model simultaneously provides affordability and generates premium returns through efficient space utilisation. That economic arbitrage works particularly well in markets like Dubai where affordability pressure is acute and the target demographic skews young and mobile.
Western Markets Are Scaling Fast
The UK coliving market reached 8,730 operational units by late 2024—representing 7% of institutional build-to-rent stock. 33% of European institutional investors have already entered coliving, with another 44% planning to do so by 2028. The sector is scaling rapidly in markets with similar demographics but less compelling fundamentals than Dubai.
Yield Premiums Are Real
Paris coliving properties achieve 4% net yields compared to 2.3% for traditional multifamily. Madrid coliving delivers 4.1% yields versus 3.5% for conventional properties. The yield premium isn’t speculative—it’s operational, driven by better space utilisation, lower per-unit costs, and the ability to charge separately for both private space and shared amenities.
Dubai’s regulatory environment actually creates some advantages for coliving that don’t exist in more restrictive Western markets. The ability to design buildings specifically for shared living without navigating decades of zoning codes and neighbourhood opposition gives developers flexibility. The challenge is execution—building coliving that works culturally, operationally, and financially in a market with no local precedent to reference.
What Actually Needs to Happen
The path from where Dubai is today to having a functional institutional rental sector isn’t complicated, but it requires coordination across developers, investors, regulators, and operators.
1. Design for Rental from Day One
First, projects need to be conceived as rental-hold from inception, not as sale properties with rental as a backup option. This means different unit mixes, different amenity packages, different financing structures, and different design decisions about everything from finishes to mechanical systems. Buildings designed for sale optimise for marketing appeal to individual buyers. Buildings designed for long-term rental optimise for operating efficiency and tenant satisfaction over decades.
2. Professionalise the Operating Infrastructure
Second, the operating infrastructure needs professionalisation. Property management platforms need to evolve from servicing individual landlords to supporting institutional portfolios with thousands of units. Lease documentation needs standardisation. Reporting frameworks need to enable benchmarking. The ecosystem of vendors, service providers, and specialised consultants that support institutional residential in mature markets needs to develop locally.
3. Attract Patient Capital
Third, patient capital needs to emerge—either locally or internationally—that’s comfortable with rental-hold strategies generating returns over 7-10 year horizons rather than exit-focused strategies generating returns in 2-3 years. This capital exists. It’s funding £5.2 billion annually into UK build-to-rent and $7.82 billion into global coliving. It just hasn’t found compelling opportunities in Dubai yet.
“The fundamental question isn’t whether Dubai can support institutional rental housing—the demographics clearly indicate it can—but whether local developers adapt their business models before foreign operators recognise the opportunity and capture it first.
4. Establish Regulatory Clarity
Fourth, regulatory clarity around rental housing specifically would help. Not necessarily new regulations, but clearer frameworks around how institutional operators with large portfolios interact with existing systems, how different housing typologies including coliving are classified and regulated, and what investor protections exist for stabilised income-producing assets versus speculative development.
None of this requires government intervention beyond providing clarity and stability. The market can solve the rest if participants recognise that the opportunity exists and structure themselves accordingly.
The Downside Scenarios Nobody Models
Any honest assessment requires acknowledging what could go wrong, because the very things that make Dubai attractive for rental housing—growth, flexibility, expatriate-driven demand—also create risks that don’t exist in mature Western markets.
Population and Policy Risk
Population projections assume continued migration. The UAE is expected to peak at 10.71 million in 2033, but policy shifts could reverse flows. Economic diversification efforts may not materialise at projected pace, changing employment patterns and household formation dynamics.
Regulatory Uncertainty
Regulatory changes could undermine rental economics overnight in ways that are less likely in markets with decades of established precedent and stronger property rights protections. There’s limited absorption data to model what happens if several major developers simultaneously pivot toward rental-hold strategies, creating potential oversupply risk.
Yield Expectations May Not Match Reality
International capital may demand returns that Dubai’s rental yields can’t support without assuming aggressive rent growth that may not materialise. Operating costs could exceed projections without the mature vendor ecosystems and competitive service provider markets that keep costs disciplined in established BTR markets.
When This Actually Happens (If It Does)
Honestly, I personally really believe that BTR, and specifically coliving, will be MASSIVE in the GCC. There will be a turning point very soon.
I think the most likely timeline for Dubai developing a functional institutional rental sector runs something like this:
Next 12-18 Months: Pilot Projects Begin
First institutional platforms—likely international operators with experience in comparable markets—announce Dubai presence and begin acquiring sites or partnering with local developers on pilot projects. These early entrants will focus on coliving given its clearer value proposition and better unit economics in high-cost urban environments.
2026-2027: Learning Phase
Pilot projects complete and begin operations. Performance data starts flowing. The market learns what works—what tenant demographics respond to which product types, what amenity packages drive premiums, what operating models achieve target margins, where cultural adaptation is required and where Western practices transfer directly.
2028-2030: Scale Capital Arrives
If pilots demonstrate that projected returns are achievable, scale capital enters—likely foreign initially, given local capital’s relative unfamiliarity with rental-hold strategies and institutional investors’ existing allocation frameworks that include residential but don’t yet include GCC markets. This capital funds a second generation of larger, more sophisticated projects informed by pilot project learnings.
Early 2030s: Local Market Adaptation
Local developers begin shifting allocation toward rental-hold models as performance data demonstrates viability and capital availability increases. The ecosystem of property managers, service providers, and specialised consultants matures. Secondary market transactions for stabilised assets begin occurring, providing liquidity and price discovery.
Mid 2030s: Mature Market Structure
Dubai’s rental market looks structurally different—assuming all of this actually happens. Institutional residential represents a recognised asset class with standardised reporting, established performance benchmarks, and mature operating infrastructure. The demographic opportunity that exists today has been captured, but by whoever moved first rather than whoever had the best local market position.
The Critical Window
The critical window is the next 3-5 years. That’s when pilot projects will prove or disprove the thesis. That’s when first-mover advantages get established or when the opportunity becomes obvious enough that every developer simultaneously tries to enter, creating the oversupply that undermines economics and discredits the model.
The risk isn’t that Dubai can’t support institutional rental housing—the demographics clearly indicate it can. The risk is that someone else cracks the code first and consolidates the best sites, the best talent, and the best investor relationships before the local market has time to establish the environment for itself.
The Bottom Line
Dubai has Western-quality demographics for multifamily and coliving—young, urban, transient, cost-conscious, growing—but minimal institutional architecture to capitalise on it that would be considered baseline infrastructure in London, Berlin, or any major US city.
The UK went from zero to £5.2 billion in annual build-to-rent investment in about a decade. Dubai could compress that timeline given its population trajectory and regulatory flexibility, but only if the market stops treating rental housing as an afterthought to sales-driven development.
The $7.82 billion global coliving market growing to $16.05 billion by 2030 represents real capital seeking real returns. Dubai is getting almost none of it. The barriers aren’t demand-side—they’re business model inertia, data infrastructure, and whether patient capital emerges before the window closes.
Someone will figure this out. The question is whether it’s local developers who adapt, international operators who recognise the opportunity, or some partnership that combines market knowledge with operational expertise and institutional capital.
The worst outcome isn’t failure—it’s watching foreign operators build what should have been a locally developed sector, extracting returns that could have stayed in the region, because Dubai was too focused on selling apartments to notice that the real money in residential real estate had moved to holding and operating them professionally at scale.
The demographic opportunity is sitting in plain sight. The market hasn’t looked up from its spreadsheets long enough to see it. That window won’t stay open indefinitely.
Thanks for reading,
Zakee