Growth in hotel occupancy could be attributed to a number of government measures in 2019, like the reduction in tourism, municipal and municipality hotel room fees and the Department of Culture and Tourism in Abu Dhabi’s launch of a 600 million dirhams ($163.36 million) fund to enhance the city’s portfolio of entertainment and business events.
The report shows that the number of hotel guests reached 3.8 million in Q3 2019, a 2.9 percent increase compared to Q3 2018. CBRE expects the capital’s hospitality sector to add an extra 9,300 keys within the next three years, apart from the existing 33,000 keys accounted for in H2 2019.
Allowing 100 percent foreign ownership in certain sectors and the launch of “Hub 71”, incubator fund for tech start-ups and venture capitals, are initiatives that will help stimulate office demand according to CBRE. “Ghadan 21”, a three-year economic stimulus package of $13.6 billion will also be in place to create additional jobs, advancing the market performance of the office sector.
At the end of H2 2019, existing office supply stood at 4.3 million sqm gross leasable area (GLA) with an expected delivery of an additional 0.6 million sqm GLA by 2023. Primary office rental rates showed 1,180 - 2,260 dirhams per sqm per annum, while the secondary office rental rates came in at 700 -1,185 dirhams per sqm per annum.
A number of economic and tourism initiatives have been introduced to positively influence retail spend in the emirate, CBRE said. In H2 2019, the report reveals super-regional and regional malls witnessed performance averaging 2,420 – 2,960 dirhams per sqm per annum, while the organised street retailers accounted an average rate of 1,615 – 2,150 dirhams per sqm per annum.
CBRE also reports a notable shift in spending behavior with consumers moving towards unique homegrown concepts. The report shows that existing retail supply stands at 2.8 million sqm GLA, with an additional 0.8 million sq.ft. GLA expected to enter the market over the next three years.
“The competitive market conditions have led to an end-user driven market, especially in the capital. Given this business appetite, we see potential for developers to devise creative schemes to engage with more investors and buyers,” Simon Townsend, Head of Strategic Advisory at CBRE MENAT said.
“In the office sector, for example, landlords have reduced service charges, and are offering capex contributions and longer rent-free periods, as a strategy to sustain higher occupancy levels. It is extremely promising to see the Government’s ongoing commitment to introducing initiatives that promote economic growth and continued investment in the market, and, we are confident that under this dynamic leadership, Abu Dhabi is well-placed to experience positive trends across key sectors in the future,” Townsend said.
(Writing by Gerard Aoun; editing by Seban Scaria)
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