Deyaar planning Dh450 million hotel and serviced apartment block in Dubai’s Al Barsha

The developer will build the Sharia-compliant tower on two plots of land it owns spanning a total of 71,000 square feet.

Deyaar is planning to develop a third hotel and furnished apartment block in Dubai as the company attempts to expand its hospitality offering.

It plans to build a Dh450 million Sharia-compliant tower on two plots of land it owns in the Al Barsha area spanning a total of 71,000 square feet, the company reported in a statement to the Dubai Financial Market this morning.

The tower is in the preliminary design phase, said Mona Al Tamimi, Deyaar’s vice president for marketing and corporate communication.

Last week Deyaar launched its second hotel tower, a 19-storey block of 180 hotel apartments in Al Barsha South near the science and biotech freezone DuBiotech that is expected to complete in 2016.

The block will form part of the company’s Montrose complex, which will also include two 19 storey towers of residential apartments.

In March Deyaar, a property developer that had traditionally focused on building flats and offices, announced its decision to expand into Dubai’s booming hotels market by allotting up to a million sq ft of space in its planned projects for serviced apartments.

Deyaar, which was initially formed as the property management arm of Dubai Islamic Bank and then spun off as a private property company floated on the Dubai Financial Market, was hit hard by the downturn, prompting the company to announce in 2011 that it would switch its focus from property development to property and facility management operation.

Yet, with the market for hotel apartments in Dubai expanding rapidly, Deyaar is just one of a number of Dubai developers to have decided to expand into the sector.

London-listed Damac has announced plans to complete 7,351 serviced apartments in Dubai by 2017, and Dubai's largest listed developer Emaar has launched hundreds of serviced apartments in its Downtown Dubai development over the past couple of years.

With fewer employees per room than a hotel, serviced apartments have a leaner operating model and can tap into the extended-stay corporate travel segment. It is also easier for serviced apartments to shift their focus from short-stay to long-stay guests during downturns.

According to Colliers research, there were 24,924 hotel apartments operating in Dubai as of August, representing 28 per cent of the stock of accommodation in Dubai. Another 6,052 more units were waiting to come on line in the short- to medium-term.

It found that the supply growth of serviced apartments has outstripped hotels in recent years, with a compound annual growth rate of 14.3 per cent in the past 10 years, compared with a 10.1 per cent growth in number of hotel rooms.

“The reason that so many UAE developers are building serviced apartments at the moment is that they are capable of making much higher returns than ordinary leased apartments,” said Filippo Sona, the head of hotels for the Middle East and North Africa region of Colliers International. “Serviced apartments can fetch a premium of between 36 and 41 per cent more than an equivalent apartment rented out on a yearly lease. Traditional developers understand the business model because they are usually sold off to investors at the start of construction, and if the market turns they can be leased out like ordinary apartments.”

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