The Financial Times’ article last month, presents a very negative outlook about the UAE. Their representation characterises a population on the verge of leaving the UAE and, by extension, paints a doom-and-gloom picture of the economy.
Conversely, Bloomberg’s April article views this as a temporary event, noting that the underlying marketing fundamentals are strong and resilient.
The prevailing market data suggests that capital remains committed to the region.

The divergence between the UAE’s globalised, sentiment-driven market and Saudi Arabia’s state-led, domestic-growth model creates two risk profiles responding differently to the regional crises. We analyse the potential impact on the real estate asset class ecosystem for these two countries.

Residential Sector: Resilience and Flight

The residential sector is the first one to brace the impact, but the potential outcome requires an understanding on the underlying demographics.
The UAE has a population of around 12 million, mainly expatriate and the demand driver for rental and sales markets. At times of geopolitical tension, a “flight-to-safety” sentiment is created disrupting the owner-occupier equilibrium prompting potential actions to move capital towards perceived safer locations. While a real estate crash is unlikely, a dip in rental performance, cooling of sales, and “panic selling” are inevitable. If the war prolongs, it might trigger a potential policy response where the UAE may implement fiscal controls to control capital flows to mitigate economic volatility.

Conversely, the KSA residential market, catering to a population of 35.3 million, operates on different fundamentals. Demand is generated by a large (20 million), locally rooted demographic base operates on a “buy-to-live” culture insulating the sector from the transient sentiment and external shocks. While Saudi nationals do rent properties for living, the main demand is generated by the 15 million expatriate population calling Saudi their primary home. Many of them rarely go back to their home countries.

The regional conflict is unlikely to deter local buyers from acquiring properties or creating a “flight-to-safety” sentiment. In fact, the recent opening of the real estate market to foreigners (non-resident and resident purchasers) has created significant interest, and is likely to increase capital flows, as this demographic would like to call Saudi their “home” and this route enables it.

The analysis suggests the UAE residential sector should be seen with a cautious eye in the short and medium term, whereas the KSA residential sector is positive in the long-term.

Office Sector: Talent Hubs and HQs

The office market is linked with the movement of human capital and corporate strategy, cemented with humans calling a place “home”.
The UAE’s office sector has been propped by a series of initiatives such as the Golden Visa, relaxed business regulations facilitating company formation, and (the main one) 0% income tax. According to Savills’ Q1 2026 UAE Office report, around 72,000 companies were formed in 2025, with 26% in Q4-2025.
These small businesses require office space needed to cement their presence and conduct operations, demand is coming form the low end of the size spectrum, as seen in the figure below.

Business formations growth will likely continue as talent and companies seeking to leverage the favourable tax regime. The war, however, is going to introduce a “wait-and-see” concerning their on-shore physical presence impacting office absorption, probably a cautious time for office investors.

While the UAE’s office absorption is a bottom-up phenomenon driven by tax-sensitive SMEs, Saudi Arabia’s office demand is a top-down mandate driven by the Regional HQ Initiative and state-led economic transformation--that is structurally different. The large local population is being “upskilled” alongside international experts to carry forward the work on economic transformation through projects capitalised by the Public Investment Fund (PIF). These projects require office space to realise their objectives, and thus PIF creates the demand.

On the supply side, they are also building giga-projects and smaller real estate-based projects, all which have the commercial real estate as an asset class to improve viability, thus creating supply. The key point: their demand and supply factors are localised and less reliant on global talent patterns as it is a closed-loop system insulated from global patterns. Furthermore, they have ramped up their focus on business localisation, creating opportunities for SMEs to bid for contracts enabling growth and expansion, and coupled with the Regional HQ Initiative mandating major companies to relocate their businesses and staff to Saudi, if they are awarded a contract.

The analysis suggests the UAE faces short-term headwinds in the office sector, but long-term the market fundamentals are still robust driven by the tax regime, excellent international connectivity, and a unparalleled lifestyle. While Saudi Arabia is unlikely to face significant short-term headwinds, its long-term outlook remains, comparatively, advantageous.

Commercial and Hospitality: The Tourism Paradox

The most visible impact of the conflict is undoubtedly in the commercial and hospitality sectors, a bedrock for both countries.

In the UAE, the reliance on international tourism makes this sector vulnerable.
The disruptions in the air space have already impacted flight patterns significantly reducing tourism numbers, creating downward pressure on retail and hospitality performance. Investors should be prepared for a period of negative returns, and it would not be surprising to see asset values tumble as the market responds.
Write-downs in these asset classes are a distinct possibility, and leveraged assets are likely to miss their debt covenants.

In contrast, Saudi has a unique tourism sector built up of two demand patterns.
Firstly, the hospitality & leisure sector offers a healthy mix of global style tourist destinations and places accentuating local culture & tradition, both of which, were invisible to the international tourists. Secondly, Islamic tourism has long attracted a consistent flow of pilgrims from across the globe. Headwinds in the leisure tourism can be offset by Islamic Tourism (non-discretionary demand), as air-travel links are largely operational on the Western side and Pilgrims can be encouraged to travel domestically to tour around rest of the country.

While the UAE’s hospitality sector is highly sensitive to discretionary leisure travel and global flight patterns, Saudi Arabia benefits from a dual-demand structure. The non-discretionary nature of Islamic tourism provides a structural buffer that keeps assets operational even when leisure travel fluctuates.

Giga-Projects: The Oil Price Variable

Perhaps the most discussed aspect of the Saudi real estate ecosystem are its Giga-Projects, primarily funded by Government and sensitive to the oil price movements.
If the conflict prolongs it might lead to increased defence spending diverting capital away from Giga-Projects. Consequently, some delays in the delivery of these projects are to be expected.

However, the outlook is not entirely pessimistic. Should oil prices remain above the fiscal break-even threshold of the Giga-Project portfolio, the resulting fiscal headroom could provide the necessary capital to sustain project momentum despite the geopolitical climate. The resilience of these giga-projects will ultimately depend on the government’s ability to balance fiscal discipline with the strategic imperative of economic diversification.

Conclusion

The impact of the current conflict on the Middle Eastern real estate ecosystem is not monolithic. The UAE and KSA are responding to these pressures through different mechanisms: the UAE through the lens of global capital and transient sentiment, and KSA through the lens of domestic demographic growth and strategic state-led investment. For the property investor, the takeaway is clear: while the UAE market may face short-term volatility and a potential correction in commercial and hospitality valuations, the KSA market offers a more insulated, albeit project-dependent, growth trajectory. The current environment necessitates a shift in strategy: moving from a ‘one-size-fits-all’ Middle East allocation to a nuanced approach balancing country-specific factors.

Disclaimer: this is an analytical/opinion piece and should not be construed as investment advice regarding these asset classes.

Originally published in the Summer 2026 Edition of Property Chronicle, accessible at https://heyzine.com/flip-book/4fd9c21e00.html#page/52

Undercover Academic’s (UA) recent teaching excursion left a lasting and positive impression by real estate development projects of Saudi Arabia executed under the banner of “Vision 2030”—a socio-economic transformation program. Its key themes are developing ‘a vibrant society’, ‘a thriving nation’, and ‘an ambitious nation’. The latter focuses on creating new non-oil-based economic sectors that contribute towards the economy. Headline-grabbing real estate projects such as Neom and Qiddiya are leading the charge, but more subtle and focused projects such as Saudi Downtown Centre Company aiming to revitalise town centres of secondary cities into meaningful places of community cohesion.

As someone with almost two decades of experience encompassing both international work and contributions within Saudi Arabia, I’ve had the privilege of undertaking strategic organizational transformation and investment deals under the Vision 2030 environment, experiencing first-hand the positivity, dynamism, and enthusiasm about the future.

The anticipated outcomes include diversification of asset classes, growth in platform asset managers, and a proliferation of real estate-focused funds.

Asset Class Diversification

Vision 2030 is reshaping Saudi Arabia’s real estate sector traditionally focused on residential, commercial, and hospitality. Government programs like “National Industrial Development & Logistics” and “Invest Saudi” are actively driving investment towards emerging asset classes such as industrial zones, integrated logistics parks, and data centres. Such asset classes are spearheaded by a dedicated organization under the Vision umbrella. NEOM, for instance, is leading the charge in data centres, renewable energy infrastructure, and advanced manufacturing hubs (e.g. Oxagon), utilising sovereign capital to establish these sectors and attract subsequent private investment. This is in addition to NEOM developing new ultra-luxurious sustainable tourist destinations. This diversification suggests that Saudi Arabia’s key asset classes may soon resemble those identified in the ULI Emerging Real Estate Trends (Europe) 2025 report.

In my experience, three asset classes stand out as particularly promising in Saudi Arabia’s evolving real estate landscape:

• Data Centers: As the Kingdom enters the global AI race with ambitions to become a leading hub (link), data center development and operations is poised for growth.

• Hotels: The burgeoning tourism sector is fueling a hospitality boom, with projections of approximately 320,000 new hotel keys by 2030 (link).

• Advanced Manufacturing Facilities: While still in its early stages, this sector, spearheaded by Alat (link), holds considerable potential for future expansion. An early prototype of this asset class was the industrial zone located in King Abdullah Economic City (KAEC).

Platform Asset Managers

Saudi Arabia’s Asset Management is relatively nascent compared to the more mature and established market of the UK and US, but it holds immense potential waiting to be realised. The gap between the two countries, in terms of the number of active asset managers, has widened over the past two decades, highlighting the greater competition within the UK market (the US leads the charge with ~16,000 firms).

However, this disparity also underscores the considerable real-estate

backed opportunities available in Saudi Arabia, particularly given the value of these projects is exceeds US$ 1 Trillion (link). The combined AUM’s of the country’s asset managers stands at $0.2 Trillion, whereas the UK has $7.8 Trillion.

Once these assets are completed, the Public Investment Fund (PIF) will explore exit strategies to capitalize on their investments. This will attract international and established players, creating a competitive dynamic between local and international firms. The type of capital accessed by the Asset Manager will determine their successes, and patient capital will play a positive role. Currently, many existing players in the Saudi market originate from the banking sector, often removed from the intense operational realities of real estate. True value creation in real estate stems from operational expertise, a strength often found in investor-operators, an area of potential expansion for the Asset Managers.

REITS or Funds?

Finally, the substantial volume of real assets in Saudi Arabia is expected to drive a shift towards fund structures. Real Estate Investment Trusts (REITs), a regime established in the UK in 2007 and introduced in Saudi Arabia nearly a decade later, presents a natural pathway for this transition.

After an initial surge in listings following the introduction of the REIT regime in Saudi Arabia, interest has seemingly waned. This could be attributed to the extensive compliance requirements and broader REIT-specific challenges, similar to those experienced in the UK market (link). While one avenue (REITs) has experienced limited traction, another (private funds) has shown remarkable growth. Despite limited information on the asset class composition of these funds, it underscores a potential exit arena.

Future Outlook

Saudi Arabia’s ambitious real estate transformation is generating considerable excitement and appears poised to reshape the nation’s economy.
While attracting financial capital is crucial for sustaining this diversification, it’s equally vital to consider the long-term human impact.
These projects will become part of the legacy inherited by future generations, shaping their identity and lived experience.
Therefore, financial decisions must prioritize the well-being and cultural heritage of the Saudi people.

Originally published in the Spring 2025 issue of the Property Chronicle, accessible at https://heyzine.com/flip-book/1250454fc7.html#page/42.