Driven by digital nomads, a surge in entrepreneurial startups is driving a new investment wave in Dubai.
Around 67,000 new businesses opened in Dubai in 2023, according to data from Dubai Chambers and the Dubai Department of Economy & Tourism. About 98% of these firms are entrepreneurial startups.
This surge of economic activity, fueled by tech talent moving to Dubai, is creating demand for office, retail and industrial space in the largest city in the United Arab Emirates.
Since the start of 2023, at least 32 sizable corporate facility investment projects have landed in Dubai, per the Conway Projects Database of Conway Data and Site Selection. The largest of these are a $350 million, 614,000-sq.-ft. facility from Federal Express and a $266 million, 1,200-job project from Hotpack Packaging Industries. Both were announced in the first quarter of 2024.
“Of the 67,000 new companies launched in Dubai last year, 98% were startups led by entrepreneurs.”
— Mohammad Ali Rashed Lootah, President & CEO, Dubai Chambers
In a recent interview, Dubai Chambers President and Mohammad Ali Rashed Lootah described the outreach efforts organized by Dubai and their results in the rapidly growing city of 3.7 million people.
“Several areas of concentration witnessed huge growth,” he says. “A shift in Dubai economic strategy, launched in January 2023, laid out a very promising economic agenda that sets priorities for the next 10 years. First, Dubai will seek to double the amount of FDI [foreign direct investment] coming into the city. Secondly, Dubai will seek annual growth in global trade, with a goal to double trade by 2033. We are looking at having around [U.S.]$17 billion in FDI per year coming into the city. That will bring in $170 billion of FDI in the next decade.”
According to Financial Times FDI Markets data, Dubai ranked No. 1 globally in greenfield FDI project attraction in 2023 — the third straight year that Dubai achieved this top ranking. According to Dubai FDI Monitor data, Dubai landed a total of 1,650 FDI projects last year, up 39% from 2022.
Lootah says the new economic agenda seeks to attain future investment goals by taking advantage of “new trends centered around the digital economy and sustainability.” The crux of the economic plan is the formation of the Dubai Digital Economy.
“We are drafting new regulations, and we are ensuring the right sort of protection of data for consumers and businesses,” he says. “We are making sure that it is all in alignment. In 2023, we created an event focused on digital startups called Expand North Star. We had 1,600 participants from 100 countries come to this exhibition last year. The purpose of this event is to conduct matchmaking on the ground. The goal is to make Dubai a global connector.”
Tech Talent Moving to Dubai
Dubai’s digital economy expansion efforts are working. “Of the 67,000 new companies launched in Dubai last year, 98% were startups led by entrepreneurs,” says Lootah. “These SMEs [small and medium enterprises] are companies that have enormous potential for growth. If you look at the numbers, most of these new businesses were formed by entrepreneurs. It shows you the entrepreneurial nature of Dubai and that we have a lot of young entrepreneurs. They like to work in an environment that is business friendly. Last year, we attracted more than 500 tech-talented individuals, per the Dubai Chamber of Digital Economy. All of them are digital nomads. They are all incredibly talented individuals. They are choosing to make Dubai their first or second home.” Fintech and 3D printing companies — also called additive manufacturing firms — are included in this new digital economy; and they too are showing increased interest in Dubai.
Bluewaters Island, Dubai
Photo courtesy of Dubai Chambers and DET
Lootah notes that the number of tech relocations to Dubai in 2023 tripled that of 2022. “What helped increase their interest in Dubai was the new platform created by the city,” he says. “The city launched an initiative to have 1 million coders. It enabled startups to pitch their ideas to venture capital firms. Last year, 87% of tech startups in the region were funded by Dubai. Most of the funding came from private firms.”
Many of these aspiring tech moguls are drawn to Dubai by the city’s reputation for modern architecture, abundant amenities and luxurious lifestyle. An estimated 17 million people visited the Burj Khalifa alone in 2023, according to DET. Another 12.4 million visited the famed Dubai Fountain. DET adds that Dubai welcomed 17.2 million international overnight visitors in 2023, an increase of 19.4% from 2022. DET notes that “Dubai’s nearly 20% year-over-year growth in tourist arrivals last year paralleled the emirate’s 3.3% GDP growth in the first nine months of 2023.”
Dubai International Airport is well known as a stopover or transit point for international travelers. A special transit visa allows a foreigner who is transiting and continuing to points abroad to enter the country as a visitor and stay for a period not exceeding 96 hours. But other indicators point to an appetite for much longer stays than that.
While all major real estate sectors are growing in Dubai, demand for office space in the emirate is outpacing office demand in other parts of the developed world. The DET report described the office scene as “rapidly growing demand largely centered around green-certified assets, demonstrating an increased interest in sustainable real estate and increased sustainability offerings. Grade A assets saw the highest demand, causing an increase in rents, particularly for buildings in the Dubai International Financial Centre (DIFC) micromarket, the emirate’s economic zone and leading financial hub in the MENA region.”
Office Rents in DIFC Up 22%
According to international commercial real estate firm Savills’ recent report on Dubai, “the office real estate market witnessed a surge in demand in 2023. The sustained economic growth, expanding non-oil sector, ongoing push to improve the ease of doing business and government initiatives to support job creation — such as the Fortune 100 Initiative — led to a buoyant office occupier demand.”
Savills reports that rental rates in the DIFC submarket increased on average 22% YOY in 2023, while some developments in the market saw their rents surge by more than 40%.
Paul Walshe, director of transactional services at Savills Middle East, said, “Unlike other global markets, where demand for office space remains low compared to the pre-pandemic average, in Dubai, the general theme for 2023 was one led by expansion and new market entrance.”
The industrial and logistics sector in Dubai also overperformed in 2023, according to Savills, with demand for 3PL and ecommerce space leading the way. DET notes that “the UAE’s e-commerce market is notably growing and is projected to reach over US$9.3 billion by 2028, driven by factors such as high internet penetration, increasing demand for online shopping, advancements in digital payment systems, and investments in digital infrastructure and logistics. Dubai Chamber of Commerce plays a pivotal role in facilitating business growth and advocating for the interests of companies in the emirate.”
; "Dubai Map")
Dubai’s wealth of destinations and districts includes the famous Palm and World Islands developments as well as the Burj Khalifa and Dubai International Financial Centre.
Courtesy of Visit Dubai
