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Hotels in Dubai continue to be impacted by the strengthening dollar and depreciation of the euro and rouble, which have reduced the emirate’s affordability for many of its primary source markets, according to CBRE’s Dubai MarketView. In May, Revenue Per Available Room (RevPAR) fell 8.3 per cent to Dh764 year-to-date compared to the same period of the previous year.
“The decline was attributed to the combined effects of lower Average Daily Rates (ADR) and occupancy levels, which fell 6.9 per cent and 1.5 percentage points respectively, according to STR Global,” said Mat Green, Head of Research and Consultancy - UAE at CBRE Middle East. “Although the Dubai hotel market saw performance soften during the first five months of the year, demand remained rather robust, with occupancies and ADR averaging 83.8 per cent and Dh913 respectively.”
In conjunction with global economic uncertainty, average rates may face additional downward pressure from the continued delivery of hotel room supply, says the report. Dubai has around 28,000 keys in various stages of development that are set to be delivered by 2018.
“The phasing of development over the next five years will have a substantial impact on supply and demand dynamics, particularly in light of the World Expo 2020,” said Green. “The sub-markets of Jumeirah Beach/ Palm Jumeirah, Business Bay and Dubai Marina/Jumeirah Beach Residence are set to witness the highest growth in the coming years.”
According to the report, the office market remained broadly stable. Average central business district office rentals remained unchanged at Dh1,884 per square metre a year, with flat rates now recorded for the fifth consecutive quarter, reflecting the stability of the marketplace. Secondary office locations have witnessed a marginal increase in performance during the quarter, with average rents rising from Dh1,170 per square metre a year in the first quarter to Dh1,175 in the second quarter. However, year-on-year the increase is around 2.3 per cent.
“Over the past 12 months, there has been a notable rise in pre-leasing activity for grade A offices, which underlines current demand for high-quality accommodation sought by corporate occupiers,” said Green. “This suggests that Dubai is starting to align more with mature international market standards, a point that is also reinforced by the gradual slowdown in development and delivery of strata style offices.”
The total office stock during the second quarter stood at around 8.2 million sq m. About 0.3 million sq m of office stock is still scheduled to be delivered by the end of the year.
Source: Property Weekly