New terminal project to boost property demand in Dubai South

Dubai’s plans to build a new passenger terminal at Al Maktoum International Airport is expected to boost demand for both residential and commercial real estate in Dubai South and its adjacent areas, according to analysts and property developers.

Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, announced that the emirate will construct a new terminal at Al Maktoum Airport with a total investment of Dh128 billion ($34.8 billion) to boost its capacity to 260 million passengers.

Once complete, the airport will have "the world's largest capacity" and will be five times the size of the current Dubai International Airport, which is currently ranked top globally for international passenger traffic, Sheikh Mohammed said on X on Sunday.

The "move is expected to further activate and bolster Dubai South, Expo City Dubai, and the surrounding areas for residential, commercial, hospitality and industrial asset classes", Prathyusha Gurrapu, head of research and consulting at Cushman & Wakefield Core, said.

“As an entire city is expected to be built around the airport in Dubai South over the next 10 years, demand for housing for a million people is reported to be generated, further underpinning the city’s growth.”

The first phase of the airport project is expected to be ready within 10 years, with the capacity to accommodate 150 million passengers annually.

The airport will offer public transport links including metro, bus and city air transport. It will also have the capacity to handle 12 million tonnes of cargo annually, with offices of logistics and air transport sectors based around the mega project.

“There will be significant demand from airport employees who will migrate from Dubai International Airport to Dubai World Central, with properties in the affordable price bracket likely to increase in popularity,” Simone Dobson, chief operating officer of Chestertons Mena, said.

“There will also be more demand for commercial, industrial and warehousing space from companies who supply airlines and airport operations.”

The announcement puts a renewed focus on developing DWC, but prices will not be affected in the short term, said Haider Tuaima, director and head of real estate research at ValuStrat.

"The real estate market cycle is already within an upswing stage, therefore immediate impact on residential prices is not expected to be felt," he said.

"The commercial market may see some additional uplift in the medium term due to the expected demand for airport-related businesses. Overall demand is predicted to increase over time, prompting developers to refocus on the Dubai South area and launch more projects there."

New developments

New developments along Sheikh Mohammed bin Zayed Road and Emirates Road are also expected to be started and demand for residential communities, such as Discovery Gardens, Dubai Investment Park and Al Furjan will rise, according to Ms Dobson.

The industrial area of Dubai Investment Park, Jebel Ali and Dubai Industrial City as well as Dubai South Freezone “will also enjoy further growth”, she added.

The UAE property market has been booming in recent years on the back of government initiatives such as residency permits for retired and remote workers and the expansion of the 10-year golden visa programme.

Overall growth in the UAE’s economy due to economic diversification efforts is also supporting the property market.

Dubai's luxury prime market hit a record in 2023 as sales of $10 million-plus homes nearly doubled to $7.6 billion, performing better than London and New York, Knight Frank said last month.

While sales within the price bracket rose by 91 per cent last year, about a third (28 per cent) of the 431 transactions were completed in the final quarter.

Emirate's most important area

The new airport expansion “cements Dubai South’s position not only as the city’s fifth central business district, but arguably paves the way for its emergence as the emirate’s most important one”, Faisal Durrani, partner and head of research - Mena at Knight Frank, said.

“With projections for a million residents in the immediate vicinity of the new airport, there will need to be a concerted effort by developers to accelerate construction plans to house the expected influx of residents," he said.

"The reactivation of the Palm Jebel Ali late last year is a further signal of the rising prominence of south-western Dubai as a focal point for economic activity.”

Last year, Sheikh Mohammed approved a new master plan for Palm Jebel Ali – a luxury lifestyle mega project that will occupy an area twice the size of Palm Jumeirah.

The long-planned tourist attraction – spearheaded by the leading developer Nakheel – will include 80 hotels and resorts, green spaces and other leisure and retail amenities spanning 13.4 square kilometres.

The project will add about 110km of coastline to Dubai, offering beachside living to 35,000 families.

“Purely on the basis of the expected demand-supply imbalance, prices in the medium-long term are likely to experience sustained upward pressure, especially around Dubai South,” Mr Durrani said.

Bullish about demand

Developers are also bullish about rising demand in Dubai South after the latest announcement of a new terminal.

Dubai’s Damac Properties said the airport's expansion is likely to attract more businesses, professionals and investors to the region, “driving up demand for both residential and commercial properties”.

“We have properties in Dubai South and will continue to tap into the location where we find the scope to invest,” Hussain Sajwani, founder and chairman of Damac Group, said.

Earlier this month, Dubai South Properties launched the fourth phase of its South Bay waterfront development after selling out the first three phases, which includes more than 600 villas, while the Dubai property developer Azizi Developments launched a Dh30 billion mixed-use development in Dubai South last year.

The development of the new terminal is “expected to boost demand for Dubai South as an area, especially the real estate projects by Dubai South Properties, which are likely to see an uptick in interest due to their proximity to the Al Maktoum International Airport", Nabil Al Kindi, chief executive of Dubai South Properties, said.

He added there are several active construction projects within the Dubai South area, collectively exceeding over Dh4 billion in contract value including several infrastructure initiatives.

“Looking ahead, Dubai South Properties is on track to complete and deliver approximately 2,500 units next year. In addition, other active developers in the area are anticipated to add around 5,500 units to the market,” Mr Al Kindi said.

Azizi Developments, which is building the Azizi Venice project in Dubai South, has sold more than 5,600 units at the project with sales worth more than Dh5 billion since its launch last year, according to Farhad Azizi, chief executive of the company.

"The airport, which will become the largest in the world upon its completion, will undoubtedly add substantial value to its immediate surroundings," Mr Azizi said.

Fibha Ahmed, vice president of property sales at Bayut and dubizzle, said the project will increase investment in property in the emirate and add value to properties in the vicinity.

"Once the airport development comes to fruition, we can expect infrastructure enhancements to fuel demand for both residential and commercial properties in Dubai as a whole, driving considerable appreciation in property values in communities with easy access to the new airport terminals," said Ms Ahmed.

"In the past 12 months alone, the area has recorded a 30 per cent increase in sales volume for residential apartments, with the transaction sales value appreciating by nearly 40 per cent."

She said nearby areas like Al Furjan, Jebel Ali and Dubai Investments Park can also expect to see an increase in interest from investors.