Whilst CBRE expects the economy to begin to bounce-back in H2 2020, the pandemic’s effects were so strong in H1 2020 that the year as a whole will still register a contraction of economic activity. It is estimated that Abu Dhabi’s GDP will contract by 7.2% in 2020, and begin recovery in 2021, supported by an AED 3 billion stimulus package that includes initiatives such as subsidies, rebates, and financial support. In parallel to this, the Government of Dubai has a similar stimulus package of AED 1.5 billion to support various sectors.
“There are 3 key challenges to recovery: subdued consumer demand; lower disposable income, and restrictions in occupancy of retail and commercial space. These in turn are impacting the real estate sector, which is having to adapt and evolve to the ever-changing demands of the pandemic,” said Dima Isshak, Senior Manager, CBRE.
CBRE findings:
Residential: While transaction activity decreased by 20% in H1 2020 vs H1 2019, a rebound is expected after restrictions were eased. Developers and landlords are increasingly offering a range of incentives such as discounts on DLD fees, longer payments plans and rent-free periods
Office: Businesses and employees continue to adopt flexible working arrangements, and companies look to reduce their central operational costs. To reduce the impact of the pandemic, landlords continue to offer incentives such as rent-free periods and reduced lease rates in an effort to maintain occupancy levels and retain tenants. CBRE expects the temporary mass remote working experiments brought on by COVID-19 to accelerate the trend of flexible working strategies, rather than lead to a wholesale structural shift away from office use.
Retail: Activity through digital channels will increase, as the adoption of e-commerce accelerates. Retailers who are quick to adapt and provide a seamless experience across both physical and digital formats are expected to thrive in an increasingly competitive retail market moving forward.
Hospitality: Hotels remain focused on domestic tourism, offering attractive staycation deals. Whilst there are a number of hotel chains that have announced temporary closures during the summer months, utilizing the opportunity for renovation and property improvement plans. “Moving forward, more hotel operators are expected to shift their focus on operating hotels and become “asset-light”, concentrating more on their brand and less on bricks and mortar. The adoption of artificial intelligence (AI) and automation is expected to accelerate in many hotels, providing a contactless environment for guests,” says CBRE.