The COVID-19 epidemic wreaked havoc on the UAE economy, with preliminary projections indicating a 7.7% drop in GDP in 2020. Despite this setback, the UAE’s excellent management of the epidemic and fiscal and monetary stimulus measures have resulted in specific industries recovering.
The Purchasing Managers’ Index (PMI) for the UAE indicates that business activity stabilized in Q3 and Q4 2020. However, the PMI’s employment index dropped for the 12th straight month, and UAE employment rates fell by 8.5 percent in 2020.
According to statistics from Oxford Economics, the UAE’s GDP is expected to grow by 1.1 percent in 2021 and by 4.0 percent in 2022. In 2021, Abu Dhabi and Dubai are projected to expand at 1.6 percent and 5.4 percent, respectively, over this period.
Residential Real Estate Market
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In 2020, residential sales prices in Abu Dhabi dropped by 2.0 percent on average, while average standard sales prices in Dubai plummeted by 7.1 percent.
Despite some of the UAE’s most severe lockdown restrictions in the early stages of the epidemic, residential demand in 2020 has remained reasonably resilient. According to preliminary statistics, over 33,000 residential units were sold in 2020, down 16.4% from 2019. However, secondary market sales rose by 7.2 percent during the same period, accounting for the biggest proportion of market activity for the first time in five years.
Prices in Dubai’s premier residential market fell by 4.2 percent in the year to December 2020, but transaction volumes increased by 7.9% in 2020 over 2019.
Residential rentals in Abu Dhabi continued to weaken in 2020, with average rents falling by 4.3 percent, while rental rates in Dubai fell by a considerably greater 12.2 percent.
According to the forecast for 2021, new supply in the residential markets of Abu Dhabi and Dubai would reach historic highs of about 14,000 and 83,000 units, respectively. Even if this planned supply merely materializes according to historical patterns, we may anticipate sales prices to continue to fall at a comparable pace until 2020.
Retail Market
The UAE’s retail industry was already under pressure before the pandemic started, and the advent of the epidemic has driven several shops to the verge of bankruptcy. Annual resident-based retail expenditure in the UAE is expected to fall by AED 8.2 billion by 2020.
However, tourist expenditure makes for a substantial percentage of the overall demand in certain areas, notably Dubai. As a consequence, it’s not unexpected that footfall counts are still much lower than pre-pandemic levels. According to Google’s Mobility Index, overall visitor counts to Abu Dhabi and Dubai’s retail and leisure businesses were 31.0 percent and 36.2 percent lower than pre-pandemic baselines when the lockdown ended in 2020.
Reduced traffic levels and the UAE’s rapid embrace of e-commerce in the past year will continue to be significant challenges for the retail industry in the UAE. Retailers and customers will continue to flock to physical retail locations, especially those with demand drivers.
With margins decreasing and competition rising, rents are expected to be put under even more pressure. In Abu Dhabi, 87,000 square meters of GLA will be added in 2020, bringing GLA to 1.99 million square meters. This is expected to rise to 2.70 million square meters of GLA by 2024. Dubai will add 202,000 square meters of GLA in 2020, increasing its total GLA to 3.86 million square meters.
Hospitality Market
The COVID-19 epidemic has posed an unparalleled set of difficulties to the worldwide hospitality industry. Consequently, passenger traffic at Dubai International Airport, the world’s largest international airport, dropped to 17 million in 2020, down from 86.4 million the previous year.