The United Arab Emirates (UAE) is entering 2025 with one of the largest construction pipelines in the world, valued at more than $590 billion, according to the latest UAE Construction Cost Benchmarking Report 2025. The findings highlight both the opportunities and challenges facing the country’s real estate and infrastructure sectors this year.
Real Estate Growth Continues
In 2024, the UAE recorded $243 billion in real estate transactions, covering more than 331,000 deals. Mortgage transactions alone exceeded $75 billion, showing strong demand from buyers and investors. Residential projects remain the main driver, while investments in tourism, leisure, and infrastructure continue to strengthen the UAE’s role as a global real estate hub.
The construction sector is expected to grow steadily over the next five years, with forecasts suggesting it could reach nearly $95 billion by 2029 at an annual growth rate of around 6%.
Rising Costs Ahead
Despite strong market activity, the report warns of cost pressures. Construction costs are forecast to rise by 2–5% in 2025, following a 2–3% increase last year. Key reasons include:
- Higher wages as skilled labour shortages persist.
- Volatile material prices due to global supply chain pressures.
- Inflation and tighter procurement conditions.
Technology and Efficiency
To manage rising costs, the UAE is increasing its use of new technologies in construction. Building Information Modelling (BIM) is improving collaboration, while AI-powered tools are helping to reduce risk and streamline project management. Modular construction and automation are also gaining traction, reducing waste and addressing labour shortages.
Sustainability at the Core
The UAE is also keeping sustainability at the forefront of its development plans, in line with the country’s Net Zero 2050 Strategy. Developers are adopting low-carbon materials, expanding the use of green certifications such as LEED and Estidama, and integrating carbon tracking across projects.
This shift is making sustainable buildings more attractive to global investors, further boosting demand for green real estate.
Luxury and Steel Markets Expanding
The report highlights strong growth in luxury housing, with Dubai completing nearly 9,000 villas in 2024 and another 19,700 planned for 2025. Demand is being fuelled by wealthy buyers seeking premium properties.
At the same time, the structural steel sector is expanding rapidly, with production expected to grow at 8% annuallythrough 2030. Local producers are increasing capacity to meet rising demand for large-scale developments.
Outlook for 2025
While challenges around costs, labour, and materials remain, the UAE’s construction market is set for another year of growth. Major infrastructure projects, expanding real estate demand, and new technologies are driving the sector forward.
The report concludes that developers and investors who work with smart construction project managers adopting smarter procurement, advanced technology, and sustainable practices will be best positioned to succeed in the evolving UAE market