There’s a preference for high-end properties among developers in Dubai in both the commercial and the residential sector. However, with the growth of construction across the emirate and the consequent increased hiring by construction companies, there’s already a shortage in affordable staff accommodation.
Dubai Expo 2020 is a powerful drive for the growth in the construction sector, which is expected to further soar from 2016. Preparations for the event will require multiple major projects from road construction to the building of hotels, retail and business buildings, as well as residential projects. The construction industry’s share in the economy of Dubai stood at about 8% in 2013, while experts point out that the volume of announced and planned projects in the UAE as a whole is around $700 billion, with most of them being in Dubai. It is estimated that currently, over 14,000 buildings are under construction in the emirate and the number of employed staff increases when we add road and other infrastructure projects.
As a result, the demand for staff accommodation has sharply increased in past year, with the trend predicted to maintain in the coming four or five years. As construction companies hire personnel, laborers mostly, they are finding it hard to accommodate them. Low-cost housing for workers is hardly available and some firms resort to buying entire buildings. Some analysts expect that Dubai will need more than 60,000 units in this ultra-affordable segment, despite the fact that most developers are focused on building more expensive properties that of course are generating bigger revenues in both the long- and the short-term.
The demand for cheaper accommodation can be easily recognised when comparing average rental rates from a few years ago to the rents, asked today in most labor camps. While five years ago, a bed in a labor camp was around AED 200 a month, it now costs AED 450 or even more. Growth in the retail and hospitality sectors has also seen many firms struggle to find more affordable options for their employees. Many companies are now looking for long-term rentals, while others find more sense in owning entire communities rather than paying housing allowances to their workers. Many are also locating their staff in neighboring emirates where rents are substantially lower than those in Dubai.
Therefore, developers will need to shift their traditional focus from the high-end segment to more affordable projects in order to meet the increasing demand. While this may not be as profitable, it may provide a steady and predictable rental income to investors.
