Dubais office market remains splintered as the areas of prime free-zone and non-free-zone real estate experience stability while the secondary market continues to diminish. Simultaneously, Dubais hospitality market also records inadequate performances, according to a new report.
The Q2 2017 Dubai Marketview by CBRE says that prime rental rates have not observed much change in recent times, with the rate staying at around AED1,920 per sqm per annum. This calmness in a period of prevailing weaknesses in the economy proves the relative scarcity of and high demand for good quality commercial space. The performance of these prime regions is in stark contrast to the secondary office market, which found itself dipping further in performance, declining by 4% during the quarter to AED1,000 per sqm per annum.
Mat Green, head of research and consulting UAE, CBRE Middle East, says: Latent demand for Grade-A office spaces remains, particularity for properties that are able to offer tenants a dual licensing option. However, demand for typical onshore buildings in the traditional business districts continues to weaken, resulting in declining rental trends and greater flexibility in leasing terms.
The report further stated that as Expo 2020 approaches, the hotel industry grows exponentially, which may have resulted in a temporary financial lull. New room supply has increased immensely as hoteliers struggle to preserve occupancy rates and attempt to attain greater non-room revenue during the summer. The vast supply of new rooms prompted hotels to offer severely slashes rates that helped increase the occupancy rate by 2.1% year-on-year. Despite this, average daily rate (ADR) and revenue per available room (RevPAR) have still dwindled, falling 3.2% and 1.1% respectively.
Green says: With developers pushing to complete hospitality projects in time for the Expo 2020 event, supply levels continue to expand rapidly, with over 35,000 new hotel keys and hotel apartments are still to be completed by the end of 2019. The vast majority of these properties are found to be four-star and five-star hotels, reflecting the market orientation towards higher quality products despite government incentives to increase the focus towards mid-market rooms.