UAE’s hospitality sector performs strongly in Q1 of 2022

The Expo2020 and return of international visitors are cited as some of the reasons for the strong performance of the UAE’s hotel market in the first quarter of this year, according to a report from the global consulting firm JLL.

In its Q1 2022 UAE market overview report, JLL said the uplift in overall performance was primarily driven by beachfront and luxury developments, which have been benefitting from strong leisure demand. Moreover, both upper-upscale and midscale hotels saw higher average daily rates (ADR).

Khawar Khan, Head of Research for the Middle East, Africa and Turkey region at JLL, said: “Post pandemic, operators may look towards adopting a more robust revenue management strategy to help owners achieve a higher bottom line. The resultant short-term impact may be a small dip in performance, but it should ultimately lead to improvements in the longer term.”

“Flexible workspaces are seeing strong interest from new market entrants, as well as some corporates who are taking a “wait-and-see” approach before signing long leases elsewhere due to the evolving market situation,” Khan said.

Office Market Momentum

In the office market sector, building on the momentum was seen in the final quarter of last year and rents in well-managed quality office buildings continued to perform well.

In Dubai, average Grade A rents in the CBD were up 9% year-on-year (YoY), to about $500.85 per sq. m. per annum in Q1 of 2022. On the same basis, Grade A rents in Abu Dhabi rose by 5% to an average of $449 per sq. m. per annum.

Financial and technology firms remain the main drivers of demand for Grade A office space, with a majority leases being signed by occupiers active across those sectors.

In the residential market, construction activity continued in earnest as improving sentiment and rising demand from investors and end-users alike provided developers with renewed impetus to deliver projects. Over the remainder of this year, an additional 42,000 units are expected to be completed. Improving tenant demand for residential units broadly underpinned the annual increase in rents in February, of 11% in Dubai and 3% in Abu Dhabi.

In the retail market, certain retailers, particularly in the food and beverage service, reported robust revenues – exceeding the levels seen prior to the COVID-19 pandemic. On the other hand, consumer spending on luxury goods remained constrained and this was reflected in a broadly flat performance for this segment in Q1.