Real estate performance in the UAE remained largely stable in 2015 as developers adjusted to lower oil prices, reduced government spending and a significantly slower rate of economic growth than in recent years by reducing levels of new supply.
The latest report from property consultancy, JLL, shows that average commercial rents have remained largely unchanged in both Dubai and Abu Dhabi over the course of 2015. While rental growth was recorded in a number of the best quality schemes in both markets (those with low levels of availability), it was not an accurate reflection of the overall market where rents have generally remained unchanged in the face of significant levels of vacant space.
Commenting on conditions in the country’s retail market, Head of MENA Research at JLL, Craig Plumb says, “The growth in retail sales has slowed in the UAE during 2015 with some retailers struggling to meet high rental rates.
This in turn has forced landlords to offer discounts and attractive deals to gain and retain tenants. Further rental growth is likely to be limited to turnover provisions rather than base rental increases in most malls during 2016”
Over in the hotel sector, the Emirates’ market showed a more mixed performance throughout the year. While ADRs remained flat in Abu Dhabi, room rates in Dubai saw a 9 percent decline during the year to October. Occupancy levels remained healthy in both markets, at 74 percent and 77 percent in Abu Dhabi and Dubai respectively. The hotel market is now at more competitive levels than in 2014, partly attributable to a decrease in the number of tourists from Russia, South Asia, Far East Asia and Africa visiting Dubai – due to a slowdown in their domestic markets and the strengthening dollar as well as the addition of new hotel rooms.
“Looking ahead, Dubai’s hotel market is expected to record a further softening in 2016, followed by a pick-up in activity from 2017 onwards with the delivery of Dubai Parks and the run up to Expo where the government is expecting 20 million guests by 2020,” said Plumb. “Conversely, hotel demand continues to improve year-on-year in Abu Dhabi largely due to improvements in tourism offering and the expansion of Etihad’s network.”
“Abu Dhabi’s recent bull-run came to an end in Q4 2014, triggered initially by the decline in oil price,” says David Dudley, Head of JLL’s Abu Dhabi office. “The general trend during 2015 has been a slow-down in demand – largely driven by a reduction in government spending and investor sentiment – but with limited new supply, market conditions have remained stable.”
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Head of Research - JLL MENA