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According to the latest JLL UAE Property Market Overview report, Dubai will welcome some 3.1 million tourists in the first two months of 2023, a 42% increase compared to the same period last year.
The UAE’s hospitality sector is on a strong growth trajectory in the first quarter of 2023, driven by a steady influx of tourists from three key source markets, India, Russia and Oman, according to a report.
Growth in inbound tourism has also benefited the low-to-midscale hotel sector, with occupancy and RevPAR (revenue per available room) rising 7-8 basis points (bps) in the first two months of the year. In addition, events such as Gulf Food and IDEX in Dubai and Abu Dhabi further helped the operator achieve impressive results.
Faraz Ahmed, Research Associate at JLL Mena, said: “While all industries continue to build on their performance in 2022, this year’s well-planned event calendar coupled with continued growth in visitor numbers has placed the hospitality industry firmly on a growth trajectory, reiterating Its position as one of the strongest pillars supporting the accelerated growth of the UAE’s economy. However, macroeconomic fluctuations continue to affect global travel trends, making it crucial for operators to adopt effective revenue management strategies to boost revenues, especially in luxury goods field.”
Dubai’s hotel inventory climbed to 150,000 keys, with around 2,000 keys delivered. In addition, approximately 8,000 keys are expected to be delivered this year, driven by increased demand. In contrast, hotel supplies in Abu Dhabi had limited completion, with around 200 keys added to existing stock, bringing total inventory to 32,500 keys. The future supply pipeline in the capital this year remains at a modest level of around 200 keys.
Retail remains steady; steady pipeline
In the retail sector, Dubai added around 34,000 sqm of space in the form of community retail developments, increasing total stock to around 4.7 million sqm in the first quarter. Over the same period, Abu Dhabi delivered superregional and community retail developments totaling 212,000 sqm of retail GLA (gross leasable area), subsequently pushing the capital’s total stock to 3.11 million sqm. Over the next few months, approximately 213,000 square meters of retail space are expected to be delivered in the two emirates, with a total of 500 square meters of retail space, of which approximately 194,000 square meters are expected in Dubai and approximately 19,000 square meters in the capital.
In Dubai, well-located primary malls outperformed the overall market in Q1 2023, with average rents rising by 1% year-on-year, while citywide average rents in primary and secondary malls fell by 1% year-on-year.
Some of the key developments in the industry include landlords tightening lease terms with tenants, ditching previous revenue-sharing models, and offering little capital expenditure (capex) support except in very exceptional circumstances. On the other hand, malls that are nearly full are reorganizing space to accommodate more tenants and generate additional revenue. Some also zone out large anchor stores and use other common areas to lease out additional space.
Average annual rents in Abu Dhabi remain stable in the first three months of 2023. In contrast to Dubai, landlords in the capital continue to demonstrate flexibility, offering incentives to attract and retain tenants. Depending on the brand, property managers can also negotiate income-based deals and extended renovations.
Off the plan deals beat existing properties in leading residential sales
In the residential sector, off-the-plan sales in Dubai started to recover in the third quarter of 2022, helped by new projects launched late last year. The trend has continued for the third quarter in a row, with off-the-plan transactions outperforming existing properties in both value and volume, accounting for 56% of total value and 59% of total transaction volume, respectively. This is a strong indication that developers and investors have regained confidence in the off-the-plan housing market.
Also in Abu Dhabi, off-the-plan transactions have led the market since the second half of last year, driven by the launch of several new projects. Off-the-plan transactions accounted for about 74% of total residential sales, according to Quanta. Price pressure on outdated projects on the main island continues to mount as residents prefer to relocate to developments on new islands that offer modern amenities. As a result, citywide average sales prices and rents both edged up by 1%.
On an annual basis, rents in Dubai rose 28% in February 2023, with demand for larger units, especially villas, continuing to drive up rents. In addition, in the first quarter of 2023, a 52% increase in value and a 50% increase in volume of residential sales activity compared to the same period last year impacted sales prices, which are 12% higher than in 2022.
Residential supply in Dubai increased by 9,800 units in the first quarter, bringing the total stock to 690,000 units, with another 32,000 units scheduled for delivery in the coming year. In the capital, about 1,800 new dwelling units were added, bringing the dwelling stock to 281,000 units. In terms of upcoming supply, Abu Dhabi has another 4,000 units in the pipeline for 2023.
Increased preference for Grade A space continues to drive the office sector
To encourage employees to return to offices in the UAE, as well as attract and retain the best talent, businesses are increasingly looking to upgrade their real estate holdings with a subsequent focus on sustainability and wellness. In addition, the first quarter of 2023 also recorded a significant increase in inquiries from new market entrants and strong demand for flexible offices.
Building on last year’s strong momentum, the segment continues to perform well, driven by strong demand for premium Class A spaces that offer a healthy, vibrant and experience-oriented environment. As a result, average Grade A rents in Dubai CBD rose 16% year-on-year to AED 2,140 per sqm in the first three months of this year. Per year. Also in Abu Dhabi, a combination of high demand and limited stock of prime space drove Grade A rents up 9% year-on-year to an average of AED 1,800 psm. Per year.
Additionally, steadfast demand has led to rapid uptake of available space within Dubai’s Central Business District (CBD), resulting in a drop in the average vacancy rate to 11%, compared to a citywide vacancy rate of 23% in the capital.
The report further highlights that tenants looking for prime office space are expected to face continued competition in the coming quarters, with landlords unlikely to negotiate rates and capital expenditures.
With no noteworthy office completions in either city in Q1 2023, stock was steady at 9.1 million sqm in Dubai and 3.9 million sqm in Abu Dhabi. However, over the next three quarters, around 100,000 sqm of office space is planned to be delivered in Dubai and 35,000 sqm in the capital. – trade arab news agency
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