The COVID-19 pandemic has had a profound and multifaceted impact on the global commercial real estate market, particularly the office and retail sectors. The year 2025 marks a crucial point for assessing the extent of recovery and adaptation of these markets to the new realities. This overview focuses on analyzing the current state and prospects of office and retail real estate in two strategically important regions: Dubai and Europe.
Rethinking Office Space: Flexibility and Regional Dynamics
The widespread adoption of remote and hybrid work models has fundamentally changed the demand for traditional office spaces 1. Businesses are seeking greater flexibility and cost-effectiveness, leading to the increased popularity of coworking spaces and flexible office solutions 1. The global flexible workspace market is projected to experience significant growth, estimated to reach $35 billion by 2030 4. Hybrid coworking is becoming not just an alternative, but the norm, as companies aim to optimize their office space usage by combining remote work with the need for periodic in-person team interaction . There is also a growing demand for sustainable office spaces, and technological advancements are being increasingly integrated into flexible work environments, enhancing their functionality and convenience .
The initial market reaction to the pandemic involved many companies reducing their office footprints. However, in 2025, a stabilization and even selective expansion of real estate portfolios is observed, although the emphasis is on quality and flexibility 2. As the situation normalizes and companies adapt to hybrid models, many are realizing the need for high-quality office spaces to maintain corporate culture and foster collaboration 10. As a result, an increasingly noticeable division is forming between high-quality and outdated office assets 2. Tenants are increasingly preferring modern buildings in prime locations with developed infrastructure, leading to a decrease in demand for less attractive properties 9.
Dubai: The Office Real Estate Market on the Rise
Dubai’s office real estate market in 2025 is characterized by high demand exceeding supply 15. This is leading to record growth in rental rates and high occupancy levels in office spaces 15. Further increases in rental prices are projected throughout 2025 15. Large companies are facing difficulties in finding large office spaces 15. An increase in the volume of new office construction is expected; however, the market is projected to remain undersupplied until 2027-2028 15. Dubai is also witnessing active development of sustainable and “smart” real estate . The combination of high demand, limited supply, and government initiatives creates favorable conditions for the continued growth of Dubai’s office market, making it attractive to investors and developers capable of offering quality spaces .
Europe: Uneven Recovery of the Office Sector
The European office real estate market in 2025 demonstrates a gradual improvement in leasing levels 9. A decrease in vacancy rates is expected in several cities 9. Tenant preference for high-quality buildings in good locations remains 9. Moderate growth in leasing volumes is projected 9. Slight increases in rental rates for prime properties are expected in most markets 9. Some cities are experiencing an increase in the volume of new construction 9. The recovery of the European office market is uneven across different cities and largely depends on the quality of office spaces 9. Prime locations and buildings meeting ESG standards are showing higher rates of recovery 9.
For a clear comparison of key indicators of the office real estate market in Dubai and Europe in 2025, the following table is provided:
| Indicator | Dubai | Europe |
| Projected Rental Growth (Prime) | 10-12% 16 | 2.5-3% 13 |
| Expected Vacancy Rate | Further decrease expected to >94% 16 | Decrease expected 13 |
| Key Trends | Limited supply, high demand, focus on sustainability 15 | Gradual improvement, preference for quality, increase in new construction in select cities 9 |
Adaptation and Evolution of Retail: Finding Stability in a Changed World
The retail sector is successfully adapting to the challenges associated with the pandemic and the growth of e-commerce . There is a steady demand for shopping centers focused on essential goods and for luxury retail properties . The concept of “experiential retail” and the integration of online and offline channels are becoming increasingly important . Some markets are experiencing stable growth in rental rates in the retail sector . While traditional retail formats may face difficulties, segments including grocery stores and luxury retail are showing good performance . The future of retail is linked to providing unique experiences that cannot be obtained online . The pace and nature of the recovery in the retail sector may vary between Dubai and Europe, influenced by factors such as consumer behavior, economic conditions, and the level of tourism development. Dubai’s strong tourism sector may contribute to the growth of certain retail segments, while European retail may be more influenced by the local economic situation and consumer confidence.
Navigating the Future: Key Aspects for Investors and Businesses
In the office sector, investors are advised to focus on high-quality properties in prime locations with developed infrastructure 13. Businesses should consider using flexible office solutions to optimize costs and adapt to hybrid work models . Sustainability and the integration of technology into office spaces are also becoming increasingly important . In the retail sector, investors should pay attention to segments of essential goods, luxury retail, and properties with the potential to create “experiential retail” . Retailers need to implement omnichannel strategies and create attractive conditions for customers in physical stores . The high growth potential of Dubai’s commercial real estate market, especially in the office sector, should be considered . Europe is experiencing a more complex recovery, but opportunities exist in prime locations and in the segment of environmentally sustainable buildings 9.
Conclusion: Opportunities in the Commercial Real Estate Market in 2025
Despite the ongoing challenges, 2025 presents significant opportunities for those who understand the dynamics of the commercial real estate market and are ready to adapt their strategies. The market is in a state of transformation, which often creates favorable conditions for identifying new trends and making timely decisions. Nevestate.com has deep expertise in the field of commercial real estate and is ready to provide professional support for the realization of your investment and business goals.
Contact us:
- Email: info@nevestate.com
- WhatsApp: +971 50 461 9022
Interesting Posts:
- Saudi Arabia’s Top 5 Mega-Projects Transforming the Real Estate Market
- UAE Golden Visa through Real Estate Investment: Conditions, Benefits, and Market Impact
- Capital Migration into GCC Real Estate Amid Global Changes
