Dubai’s hotel serviced apartments are now hot picks
Dubai: For the yield chasing wealthy investor Dubai’s hotel serviced apartments are still the place to be in. In recent months, the premium that a serviced apartment can command over a standard ready unit in key locations has widened, and in some cases quite significantly so.
In Dubai Marina and the Downtown, the premium is at the 50 per cent mark now, while those serviced apartments at the Palm fetch 38 per cent more than others in the neighbourhood, according to data from the consultancy GCP-Reidin.
These price differentials are also showing up in the off-plan launches. “This year has already witnessed several launches in the serviced unit space, with the Address Harbor Point having the highest launch price of Dh2,300-Dh2,400 per square foot,” said Sameer Lakhani, Managing Director at Global Capital Partners. “But there have been multiple launches at even higher price points earlier, at the launch of Dukes Oceana, the Palm Tower, The One, and Opera Grand.”
So far this year, the other pricey serviced apartment launches have been the Vida Zabeel (Dh2,000 a square foot) and Vida Residence Dubai Mall (at Dh2,250). And for comparison’s sake, the highest price point for a standard unit this year has been the Dh1,800-Dh2,000 a square foot for the Downtown Views 2.
For buyers of serviced units, the pay-offs turn out to be handsome. “Clearly, when it comes to some of the more marquee names — such as the Address and Vida brands — there is a premium for units offered into the “hotel pool”,” said Lakhani. “Where this is not possible, there are a number of investors willing to place it on short-term leases themselves.
“This has been more difficult in recent times, given the recent sluggishness in the tourism market. But it remains a trend that will build sufficient momentum, especially as Expo 2020 arrives.
“Over the longer run, we could see that serviced apartments will have superior growth rates to their standard counterparts, and that’s what makes them attractive for those sort of investors.
“The market is already seeing a surge of transactions in the off-plan space for serviced apartments. In 2016, serviced units accounted for 9 per cent of all off-plan apartments sales, whereas in 2017 that has more than doubled (22 per cent), highlighting the latent demand for this kind of product.”
A case in point has been the demand generated by The Alef Residences project located on the West Crescent of The Palm. In the two months since their release, sales have touched Dh110 million, according to the developer, Al Sharq Investment. And one four-bedroom apartment sold within few minutes of the viewing, the developer said.
The Alef units — totalling 104 units across two buildings — will be serviced by The W Dubai — The Palm, located adjacent to it. The project is due for completion next year, and the apartments range between 5,000-15,000 square feet.
A “combination of elements creates a unique living experience that we can proudly say is contributing to the demand for these properties,” said Grant Ruddiman, Chief Hospitality Officer at Al Sharq Investment in a statement.
According to GCP-Reidin data, there are at present about 15,000 completed serviced apartment units in Dubai, and with an additional 30,000 units expected over the next five years.
“The expected surge reflects the optimism regarding tourism numbers, and is in line with the increase in hotels throughout the city as well,” the report finds. “Supply numbers may shift as developers adjust the pipeline depending on market conditions.
“It is likely however that the actualisation rates in the serviced space will be much higher than in the residential space, given the quality of projects, and the stage of completion that a number of these projects are currently at.”