Abu Dhabi hotels face 'subdued' 2013

Abu Dhabi's key non-oil sectors of tourism and retail are set to remain subdued next year compared to neighbouring city Dubai, according to a new report by Jones Lang LaSalle.

In its latest report on the UAE real estate market, the consultancy said that while long term prospects for Abu Dhabi's hotels market was bright, increasing supply would keep a cap on rates in the near term.

It also said that the UAE capital's retail market needed to develop to match the "high level of retail spending available".

Jones Lang LaSalle's report said, by contrast, prospects were much better for neighbour Dubai in both tourism and retail in 2013.

It said Abu Dhabi's hotels market was "still absorbing a large number of new hotels" and occupancy levels resulting in room rate declines this year.

"The long term prospects for the market remain strong, with the continued expansion of Etihad and the airport, and major investment in new leisure attractions. These projects will however take time to generate additional demand and the hotel sector is likely to remain subdued in 2013," it added.

By contrast, JLL said Dubai occupancy and room rates were at their highest since 2008 this year, supported by strong underlying demand.

"The high level of retail spending available in Abu Dhabi is not currently matched by the quality of its retail offering and there remains a net loss of spending to Dubai," the report said.

Abu Dhabi's retail offering is set to improve with the completion of a number of high quality retail projects during 2013, including the Galleria on Al Maryah Island and Deerfields Town Square.

In the longer term, the major addition to retail supply in Abu Dhabi is the Yas Mall, scheduled to complete in 2014.

In Dubai, JLL said the growth in tourists in 2012 had benefited the retail market, adding that major retail malls of Dubai Mall and Mall of the Emirates would continue to dominate the market.

Commenting on 2012, Alan Robertson, CEO of Jones Lang LaSalle MENA, said: "In 2012 the UAE real estate market has been a tale of two very different cities. We have seen cautious optimism returning to the Dubai market."

He added: "Abu Dhabi lags further behind in its recovery. The Government remains committed to a broad range of capital projects and infrastructure developments, but demand remains weak pending the return of major government capital spending whilst supply continues to drive the emirate's vacancy levels."