When Charles Sack arrived this month to work as an airline captain in Dubai, he decided to spend an extra Dh2,000 (US$544) a month to live in a serviced apartment. "I didn't want to move my furniture yet," says Mr Sack, an American. "I just came here with my clothes and books."
The Dh8,000 a month rent for a one-bedroom in the South Ridge Apartments near the Burj Khalifa was a bit steep, but it made for an easy transition from Hong Kong. "It's a short-term lease, so I can move somewhere else when I find the right place," he says. "The maid comes once a week ? It's better to spend a little up front than to get something for a year and not like it." Indeed, Mr Sack has joined a wave of residents in the Emirates who are opting for the ease of life in serviced apartments. DeveFlopers in Dubai and Abu Dhabi will be adding hundreds of these homes to the market in the coming year.
Martha Fitzharris, an assistant operations manager at the estate agency Better Homes, says the number of companies offering serviced apartments has ballooned to more that 200 in the past 18 months. With more uncertainty in the job market and the decline in residential property prices, there is increased demand especially for apartments that can be leased for a few months rather than a full year - even if these accommodations come at a premium, brokers say.
Prices range from Dh5,000 a month in Dubai for a small serviced apartment in Bur Dubai to Dh51,000 a month for a four-bedroom in Abu Dhabi. Some serviced apartments can cost more than 50 per cent more than similar size flats that have no access to hotel facilities and housekeeping services. Matthew Green, the head of research at the property consultancy CB Richard Ellis, says the prices of serviced apartments rise and fall along with prices in the rest of the market, with demand for them increasing during periods when people are unsure of how long they will be in the country. Even so, the lifestyle can be pretty comfortable. Residents willing to shell out more than Dh170,000 a year for a small one-bedroom home can live at The Address hotel in Dubai. The building has 626 serviced apartments ranging from studios to four-bedrooms for short and long-term stays.
"I didn't want to go through the rigmarole of getting furniture," said a resident who declined to give his name. "It's a bit decadent, but where else in the world can you live like this?" The fully-furnished rooms at The Address are equipped with plasma-screen televisions and "rainfall" showers. Residents have access to the hotel's concierge and amenities as well as housekeeping and laundry services.
For a developer or a short-stay apartment company, the difficulty is to keep the units fully occupied. In the summer, occupancy rates can drop to between 30 and 60 per cent, Ms Fitzharris says. Meanwhile, prices for these apartments have fallen as companies compete for business in a depressed market. "The rental rates have dropped considerably over the last year and a half, by as much as 60 per cent, and still continue to fall coming into low season," Ms Fitzharris says.
"There is stiff competition right now as new companies come into the market with very low introductory rates, though I think some will weather it better than others, depending on the location, quality and level of services they have to offer for the market rates," he adds. "Some companies will have to either upgrade their services or lower their rates even further in order to survive the current market".
One major developer of these units is Abu Dhabi's Tourism Investment and Development Company (TDIC), which has already delivered 333 serviced apartments at its Park Arjaan and Shangri-La Hotel projects. The company plans to develop another 508 serviced apartments at some of its new projects. The Abu Dhabi market has long had buildings with serviced apartments but did not cater to the higher-end market for executives.
As the market sees an influx of new homes this year and next year, residents will be increasingly discerning about the quality of their accommodations, brokers say. Rashid al Suwaidi, the acting director of sales and leasing at TDIC, says the serviced-apartment niche is a part of the agency's strategy for accommodating tourists and increasing options for residents of the capital. "By attracting longer-stay business guests, serviced apartments satisfy a certain segment of the market and are complementary to short-stay hotel rooms aimed at tourists and longer-term rental apartments aimed at full-time residents," he says. "Serviced apartments have been planned as an appropriate component to many of the international mixed-use developments that TDIC is building."