Dubai's hospitality, residential and office real estate market

08 February 2021 4 min. read

Big Four professional services firm Deloitte has released the 2021 edition of its Middle East Real Estate Predictions, an annual report into key trends and performance in Dubai’s real estate market. A roundup of the key findings across the hospitality, residential and office segments. 

Hotel market

Travel restrictions and lockdowns have significantly impacted Dubai’s hospitality market. The YTD September 2020 occupancy for Dubai averaged 45% compared to 73% for the same period in 2019, while the average daily rate (ADR) for a room per day declined by 12% year-on-year to AED 455. 

Dubai hotel market performance, January to September 2020

Compared to other major hospitality and tourism markets in the region, Dubai’s performance was relatively resilient. Occupancy was lowest in Beirut (Lebanon), Sharm El Sheikh (Egypt) and Muscat (Oman), while Abu Dhabi (UAE) and Doha (Qatar) performed relatively strong given the circumstances with an occupancy rate of around 60%. 

Dubai market performance vs. regional markets, January to September 2020

From a global perspective, Dubai ranks comparable to Sydney and London, but behind major US hubs such as Los Angeles and New York. 

According to the Middle East Hospitality Sentiment survey conducted by Deloitte in September 2020, Dubai’s hospitality market is not expected to return to the pre-Covid-19 level until the end of 2023. The consultants advise players in the sector to revise their business strategy and build resilience towards the new normal. This includes a review of management contracts, building and amenities design, food and beverage offerings, and other services within the hotel.

Dubai market performance vs. international markets, January to September 2020

However, Robin Williamson, Head of Real Estate at Deloitte Middle East, said that the speed with which the vaccine is rolled out will be a key driver for recovery. “With Expo rescheduled to start on 1 October 2021 and Dubai’s fiftieth year since nationalization, it is hoped that a rebound will occur and performance matrices return to much healthier levels towards the end of this year.” 

Residential market

Average sales prices for residential property in Dubai declined by approximately 7% between Q3 2019 and Q3 2020. Average rents also declined by approximately 10% over the same period, and the average price per sq ft for apartments declined from AED 1,090 in 2019 to AED 1,011 as of September 2020.

Dubai residential sales prices, Q3 2014 to Q3 2020

In terms of sales prices per location, Palm Jumeirah Villas is the most expensive area at AED 1,666 per sq ft, followed by Downtown (AED 1,646), Dubai Creek Harbour (AED 1,488), and Mohammed Bin Rashid City (AED 1,408). The cheapest areas to buy residential property are in the Discovery Gardens (AED 466) and the International City districts (AED 502).

Dubai residential sales prices by location, Q3 2020

Office market

Due to the rise of remote working, demand for office space has declined in 2020. As a result, office rents registered an average decline of 8% as of Q3 2020 compared to 2019. This year, the addition of approximately 900,000 sq ft of office space through the handover of ICD Brookfield Place in DIFC is expected to increase competition among prime assets in the financial district. 

Dubai average office rents, Q1 2015 to Q3 2020

Commenting on the office market, Oliver Morgan, Director and Head of Development in Deloitte’s Real Estate team in the Middle East said, “Macro-economic as well as related government initiatives are likely to define the shape and pace of recovery for the office market. Changes in spatial needs are likely to be promoted when leases expire or when companies may choose to downsize or even expand their facilities.” 

About the Middle East Real Estate Predictions report

Deloitte report was based on in depth market research, extensive consultations with industry stakeholders and analysis of data from sources that include the Economist Intelligence Unit (EIU), Oxford Economics, Reidin and STR Global. The research was led by Robin Williamson, Oliver Morgan, Dunia Joulani and Manika Dhama.