Deloitte: Middle East Real Estate Predictions 2021: Market recovery to 2019 levels expected by 2023

31 January, 2021 – Deloitte’s seventh annual Middle East Real Estate Predictions 2021 report examines the performance of Dubai’s real estate market in 2020 and forecasts the changes in the hospitality, residential, office, retail and logistics markets in 2021.

COVID-19 has caused significant disruption across all real estate sectors in 2020 with owners and occupiers having to make necessary adjustments to business operations in response to the statutory restrictions on capacity and mobility.

The Deloitte Middle East hospitality survey conducted in September 2020 suggests that the market recovery to 2019 levels may not be until 2023, or possibly later. Meanwhile many hospitality companies are revising their business strategies and building resilience towards the new normal.

Oliver Morgan, Director and Head of Development in Deloitte’s Real Estate team in the Middle East said, “In the short-term, cash management and financing/lender considerations are some of the main priorities across all real estate sectors. Macro-economic and demographic factors as well as related government initiatives are likely to define the shape and pace of recovery for the real estate sectors in 2021.”

Key findings from the Deloitte report include:

Demand for secondary market residential properties has outpaced transaction volumes for off-plan units, whilst cash transactions still dominate. Meanwhile developers are offering discounts, fee waivers and rent-to-own incentives in an attempt to attract buyers. Tenants remain in the driving seat as rent declines for
residential properties continue into 2021.

• Office space usage has faced disruption as remote working models were necessitated by the COVID-19 pandemic. Changes in spatial needs are likely to be promoted when leases expire or when companies may choose to downsize or even expand their facilities. The office of the future will blend the virtual and physical environments to enhance employee, contractor and key stakeholder engagement through collaboration tools and dynamic work locations.
• Multi-channel retail formats that incorporate online shopping preferences, alongside F&B concepts and experiential retail in bricks and mortar offerings are expected to drive consumer preferences in the medium term. The reduction in international visitors due to COVID-19 travel restrictions has impacted footfall and spending at bricks and mortar stores. Meanwhile mobility restrictions have forced residents to make more online purchases, including setting up online accounts across multiple platforms and familiarising themselves with the payment and return process, among others. This trend is expected to continue even when restrictions on movement ease.
• Growth in the e-commerce segment has increased the requirement for storage and fulfilment centres, boosting the demand for warehouses. Further expansion in the e-commerce and cargo sectors is expected in the short to medium term, with more design and build for specific end users, as opposed to speculative build. Additionally, next-day or same-delivery options are expected to create a requirement for last-mile delivery hubs, close to the residential and business districts.

“The Dubai hotel market has experienced a major shock and has had to adapt during a very difficult period. With the vaccine currently being rolled out, 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,” said Robin Williamson, Head of Real Estate, Deloitte Middle East.

To discuss the report in more detail please contact Oliver Morgan.

To view the full report click here.

About the Middle East Real Estate Predictions report, Dubai 2021

A Deloitte initiative that was produced by undertaking 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 comprised an assessment of the trend performance and future prospects for Dubai’s hospitality, residential, retail, office and industrial markets. 

About Deloitte:

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About Deloitte & Touche (M.E.):

Deloitte & Touche (M.E.) (DME) is a licensed member firm of Deloitte Touche Tohmatsu Limited (DTTL) and is a leading professional services firm established in the Middle East region with uninterrupted presence since 1926. DME’s presence in the Middle East region is established through its affiliated independent legal entities which are licensed to operate and to provide services under the applicable laws and regulations of the relevant country. DME’s affiliates and related entities cannot oblige each other and/or DME, and when providing services, each affiliate and related entity engages directly and independently with its own clients and shall only be liable for its own acts or omissions and not those of any other affiliate.

DME provides audit and assurance, tax, consulting, financial advisory and risk advisory services through 25 offices in 14 countries with more than 3,300 partners, directors and staff. It has also received numerous awards in the last few years which include, Middle East Best Continuity and Resilience provider (2016), World Tax Awards