We read across the local GCC digital and printed Media that the momentum for hotel development is strong in Dubai with the hospitality segment would be facing these day a situation of oversupply with no less than 80 hotels planned to open in the UAE in 2018. This is in part due to a certain residue momentum of the construction boom of years past for residential development that is still strong in Dubai.
Possibly leading to dangers of potential oversupply ?
Jones Lang LaSalle (SA) Pty Limited (JLL) produced a report titled “Q3 2017 Dubai Real Estate Market Overview”. It is a review of the office, residential, retail and hospitality sectors from a real estate stand point.
This long time established in the Gulf region UK company witnessed the construction boom that was frantically happening throughout the GCC countries these last few decades as it is now following the same but in a different conjecture. This is of very reduced oil price and low level fiscal state investment.
Private investment on the other hand, of, in this instance, mid-scale hotels in Dubai, which previously has gone like for all other construction sectors, through a boom, is still going on, as if on some sort of momentum. JLL’s report has notably picked up the resulting general feeling within the industry, that of any further declines in average financial returns going forward and made worse by paradoxically this type of investment.
JLL’s Q3 2017 Dubai Real Estate Market Overview report mentioned that several hotel projects, mainly in the four and five star segments, have come into the market last year and that refurbishment of derelict has become a new trend in the market.
Dubai hospitality majors were reported as if hard-pressed by these market trends as influencing their turnover. They however qualified it as performance remaining unperturbed and it is merely the market adjusting itself and not at all an indication of distress.
We reproduce here the report’s Market Summary
Cityscape remains a good barometer of sentiment towards the Dubai real estate market. The 2017 edition saw increased market activity on the back of stronger sentiment, with a number of developers reporting strong sales within newly launched projects. The dangers of a potential over-supply on the back of sales achieved from more attractive payment terms is however increasing. Generous payment terms and guaranteed rent periods, although attractive to investors, could result in a future ‘real estate bubble’.
One of the most significant announcements at Cityscape 2017 was District 2020, a master planned development of residential and commercial space on the site of Expo 2020. This project forms an important component of the planned long-term legacy from Dubai hosting Expo 2020.
Alternative real estate asset classes was another area of focus at Cityscape, with specific emphasis on the healthcare sector. With the MENA region lagging behind other developed economies in terms of spending per capita on healthcare and the provision of hospital beds,
there are significant opportunities for real estate players to tap into this sector over the next five years.
Dubai is investing heavily in the infrastructure needed to host multiple healthcare institutions, most notably through Dubai Healthcare City, a healthcare free zone offering benefits to both local and international operators. The Dubai Health Authority (DHA) is also striving to ensure the city has the medical infrastructure required to attract an increased share of the growing global market in medical tourism.