The economy of Dubai could have a massive boost over the next seven years and beyond thanks to the decision to award the city the right to host World Expo 2020.
Massive boost for Dubai jobs, tourism and real estate
Long-term job creation, as well as increased tourism, could benefit the real estate and hospitality sectors now and in the long term, according to a report by the real estate company, Jones Lang LaSalle.
However, care needs to be taken, particularly in the short term, to ensure that boosted sentiment doesn’t lead to an unsustainable situation forming in the real estate sector in particular, said Alan Robertson, regional chief executive of the company.
“While the Expo will result in long-term benefits to the Dubai economy and the real-estate market, the short-term impact needs to be managed carefully to avoid the inevitable boost in sentiment translating into excessive price growth or over development,” he said.
Expo 2020 is expected to add 2 per cent to Dubai’s Gross Domestic Product, as well as create 277,000 jobs.
That increased demand would ordinarily mean price and rent increases over the next seven years, said Craig Plumb, head of research at the company.
However, there is the danger that owners could misconstrue that long-term arc, and immediately push up prices.
“Owners may expect rents to increase overnight that wouldn’t necessarily be justified just on the back of Expo 2020. There’s no logic why rents should increase in the Marina or Downtown tomorrow, just because of the Expo in seven years’ time.
“If that happens, it could be a negative situation as it would prolong all this talk about the property market being a bubble.”
The company’s report said the hospitality sector in particular would be the “major winner” in terms of demand for real estate.
“This sector has been driving the recovery of the Dubai market over the past two years, with Dubai currently registering one of the strongest levels of any market globally,” the report said.
It added that hotel occupancy rose during the first 10 months of the year, to average 79 per cent, compared with 76 per cent last year.
That could only grow, particular during the Expo itself, when 25 million visitors are expected to attend.
The company estimates the supply needed to accommodate that is 45,000 additional rooms, with some of the demand spilling over in to neighbouring Oman.
“Winning World Expo 2020 will be the single biggest driver of activity in the UAE tourist market over the next five years,” said Chiheb Ben Mahmoud, head of Jones Lang LaSalle’s hotel and hospitality group.
“With existing hotels in Dubai trading at high levels of performance, there is already demand for additional rooms. We now expect an additional surge in proposed supply in all sectors of the market, with Dubai World Central (DWC) airport emerging as a third major cluster of hotels in Dubai, complementing the existing clusters along the beach and in the Downtown area.”
In addition, the longer term effects of hosting Expo 2020 would be in the legacy of various infrastructure projects.
The report notes that while passenger services launched at DWC in October, winning the bid would be a catalyst for the airport, and the surrounding area’s further growth.
In addition, a metro extension to the red line, increased conference space, as well as developments to the logistics hub in the area, are all long-term benefits to hosting Expo 2020, the report adds.
“Perhaps the greatest benefit from hosting major global events, be they Olympic Games, football World Cups or World Expos, lies not in the immediate impact on the host economy during the event itself, but in leveraging these short-term factors to create positive long-term legacy benefits to the economy and the urban structure of the host city,” said Mr Robertson.