Office and Hotel Market Performance Trends

𝗠𝗮𝗿𝗸𝗲𝘁𝘀 𝗗𝗶𝘃𝗲𝗿𝗴𝗲, 𝗖𝗮𝘀𝗵 𝗙𝗹𝗼𝘄 𝗧𝗲𝘀𝘁𝘀, 𝗦𝗲𝗹𝗲𝗰𝘁𝗶𝘃𝗶𝘁𝘆 𝗥𝗶𝘀𝗲𝘀 It’s time for our weekly READ - Real Estate Analysis in Dubai (December 14-20, 2025). This week we cover: → 𝗢𝗳𝗳𝗶𝗰𝗲 𝗤𝘂𝗮𝗹𝗶𝘁𝘆 𝗗𝗶𝘃𝗶𝗱𝗲 → 𝗚𝗿𝗼𝘄𝘁𝗵 𝗨𝗽, 𝗔𝗳𝗳𝗼𝗿𝗱𝗮𝗯𝗶𝗹𝗶𝘁𝘆 𝗗𝗼𝘄𝗻 → 𝗛𝗼𝘁𝗲𝗹𝘀 𝗛𝗼𝗹𝗱 𝗡𝗲𝗮𝗿 𝟴𝟬% → 𝗧𝘂𝗿𝗻𝗼𝘃𝗲𝗿 𝗟𝗲𝗮𝗱𝘀, 𝗜𝗻𝗰𝗼𝗺𝗲 𝗟𝗮𝗴𝘀 → 𝗥𝗲𝗻𝘁𝘀 𝗘𝗮𝘀𝗲, 𝗦𝘂𝗽𝗽𝗹𝘆 𝗗𝗲𝗹𝗮𝘆𝘀 1️⃣ 𝗢𝗳𝗳𝗶𝗰𝗲 𝗤𝘂𝗮𝗹𝗶𝘁𝘆 𝗗𝗶𝘃𝗶𝗱𝗲 Commercial sales value reached AED 15.5 billion in 2025, up 77.9% year-on-year. ↳ The real inflection is product: modern Grade A supply only starts delivering from 2028. ↳ Older stock faces rising vacancy risk as tenants gain credible alternatives. 𝗪𝗵𝗮𝘁 𝗶𝘁 𝗺𝗲𝗮𝗻𝘀: Office value is shifting from postcode to performance. Specification, efficiency, and operating credibility will set rents. 2️⃣ 𝗚𝗿𝗼𝘄𝘁𝗵 𝗨𝗽, 𝗔𝗳𝗳𝗼𝗿𝗱𝗮𝗯𝗶𝗹𝗶𝘁𝘆 𝗗𝗼𝘄𝗻 UAE real GDP grew 4.2% in H1 2025, with non-oil growth at 5.7% and now 77.5% of GDP. ↳ The workforce expanded 8.9% in Q3, but only 26% sit in professional or technical roles. ↳ That mix caps rent tolerance and mortgage conversion. 𝗪𝗵𝗮𝘁 𝗶𝘁 𝗺𝗲𝗮𝗻𝘀: Macro growth supports confidence, not blanket purchasing power. Demand must be segmented by income, not headcount. 3️⃣ 𝗛𝗼𝘁𝗲𝗹𝘀 𝗛𝗼𝗹𝗱 𝗡𝗲𝗮𝗿 𝟴𝟬% Hotel occupancy averaged 79.3% in the first 10 months of 2025, generating AED 24.2 billion in revenue. ↳ New hotel supply is being absorbed better than expected. ↳ This supports serviced apartments, retail turnover, and food and beverage spend. 𝗪𝗵𝗮𝘁 𝗶𝘁 𝗺𝗲𝗮𝗻𝘀: Hospitality cash flow looks resilient, but it remains cyclical. Underwrite volatility, not peak-season performance. 4️⃣ 𝗧𝘂𝗿𝗻𝗼𝘃𝗲𝗿 𝗟𝗲𝗮𝗱𝘀, 𝗜𝗻𝗰𝗼𝗺𝗲 𝗟𝗮𝗴𝘀 Dubai reached AED 624 billion in transactions year-to-date through November, driven by off-plan sales. ↳ Mid-December alone recorded about AED 20.38 billion, with off-plan near 70% of value. ↳ Land and ultra-luxury trades lift averages while resales soften. 𝗪𝗵𝗮𝘁 𝗶𝘁 𝗺𝗲𝗮𝗻𝘀: Liquidity is strong, but much of it is heavily speculative and future-dated. Secondary assets need income-led underwriting, not launch momentum. 5️⃣ 𝗥𝗲𝗻𝘁𝘀 𝗘𝗮𝘀𝗲, 𝗦𝘂𝗽𝗽𝗹𝘆 𝗗𝗲𝗹𝗮𝘆𝘀 Delivery slippage now pushes the supply peak toward 2027–2028. ↳ Apartment yields compressed to 7.36% in October from 7.82% in January. ↳ Rental disputes hit 45,000 in Q2, roughly one-third of all rental contracts, while incentives like rent-free months and utility support return in mid-tier areas. 𝗪𝗵𝗮𝘁 𝗶𝘁 𝗺𝗲𝗮𝗻𝘀: Near-term stability can mislead. Stress is moving from price to cash flow. 🔥 𝗖𝗹𝗼𝘀𝗶𝗻𝗴 𝘁𝗵𝗼𝘂𝗴𝗵𝘁: Dubai attracts capital at scale, but the edge is shifting from speed to selection. In 2026, quality, income, and delivery risk will decide who keeps pricing power.

Hotels are no longer just hotels. The ones still acting like they are will be the first to get crushed in the next 5 years. Occupancy rates in the US are projected to hit 63.4% this year, just shy of the 65.8% we saw in 2019. Average daily rates are hovering around $160, and RevPAR is already past $100. Globally, RevPAR rose almost 4% in the first quarter of 2025, driven by strong performance in urban and airport properties. The demand is there. People are traveling, staying, and spending. But if you are still thinking of hotels as single-use boxes with rooms and a lobby, you are already behind. The real conversation right now is the rise of mixed-use hospitality and blended live-work-play developments. The smartest investors and brands are moving away from stand-alone hotels to multifunctional ecosystems that combine hotel rooms, branded residences, co-working spaces, retail, F&B, wellness, and even event venues under one roof. This is not a trend. This is a structural shift. Look at The Social Hub in Europe, Zoku in Amsterdam, or Radisson’s branded residences strategy. These are not just hotels. They are lifestyle hubs where guests can stay, work, meet, eat, and connect. For owners and investors, this model spreads risk, drives higher yield per square foot, and attracts a broader demographic than any traditional hotel ever could. Conversions are accelerating this shift. Underutilized office buildings and residential spaces are being transformed into hybrid hospitality spaces at scale. Marriott is pushing Project Mid in the US to convert office buildings into hotels. In China, nearly half of Hilton’s Hampton hotels are from conversions. This is where the real ROI is right now. It is faster, cheaper, and perfectly aligned with the way people live, work, and travel today. Psychology drives this success. Travelers no longer choose hotels just for a bed. They want experiences. They want flexibility. They want to feel part of something. A hotel that gives them co-working spaces, wellness programs, social interaction, and great dining without leaving the property wins every time. That is why the best-performing assets of the next decade will not be just hotels. They will be multi-functional communities designed for the way people actually live and travel now. If you are an owner, developer, or investor, ask yourself this. How are you repurposing your underperforming spaces to meet this demand? What is your plan to integrate wellness, co-working, and residential elements into your properties? Are you building for yesterday’s traveler or tomorrow’s? Because the future of hospitality is not coming. It is already here. What are your thoughts? Are you seeing opportunities for mixed-use hospitality in your markets?

Here’s a fascinating shift in the latest CRE pricing data: Hospitality, retail, and office once moved in lockstep. But since the pandemic, they’ve split apart. By Q2 this year, prices converged again, around $140 per square foot. On the surface, that looks like “stability.” But the real story is underneath. Sub-sectors are moving very differently: ✅ Restaurants and bars are commanding bigger premiums over general retail. ✅ Full-service hotels, once discounted, are now outpacing limited service. ✅ Medical office has pulled far ahead of traditional office, and the gap keeps widening. That’s why you can’t just look at broad categories like “retail” or “office” anymore. Within each, you’ve got micro-trends shaping performance. As an investor, this reinforces two lessons: 1. Drill deeper → Don’t just ask, “Is retail strong?” Ask, “Which kind of retail?” 2. Follow demand drivers → Healthcare demand looks very different from downtown office leasing. When I evaluate deals, I always ask: What’s happening at the sub-sector level? Because that’s often where the real opportunities hide. P.S. Which sub-sector do you think has the strongest runway over the next 5 years, hospitality, retail, office, or medical office?

After analyzing deals and talking with several of my investor clients, these are the hotel markets they’re investing in now — and why: Quick context: investors remain optimistic about hotel allocations in 2025, but performance is market-by-market — so picking the right micro-market matters more than ever. Markets my clients are buying into today • Orlando, FL — big new demand catalysts (theme-park openings and event flow) are bringing sustainable leisure demand and room-night upside after a soft patch. Clients see upside in full-service and resort-adjacent assets that capture families and group travel. • Fort Lauderdale / Broward County, FL — convention center expansion and stronger trans-Atlantic and domestic air links are driving group and transient demand; investors are underwriting convention-driven ADR and occupancy recovery. • Nashville, TN — entertainment, corporate relocation, and convention demand keep Nashville a focus for boutique and upper-midscale plays where revenue per available room can outpace broader markets. • Savannah, GA — limited new supply + strong leisure tourism (historic district, cruise/port spillover) creates a defensive leisure market where select investors are targeting conversion / boutique repositioning opportunities. • Indianapolis, IN — recovering convention and corporate group demand (plus favorable cost basis vs. top 25 metros) makes Indianapolis attractive for value-add full-service and select-service strategies. ⸻ Why these picks matter: hotel performance in 2025 is uneven — the top markets and those with event/convention or structural leisure demand are more resilient. That’s why capital is moving into precise markets where underwriting includes conservative ADR/occupancy recovery paths and upside from branding, management, or repositioning.

Lodging Analytics Research & Consulting (LARC) has released its latest quarterly Market Intelligence Reports for 62 markets under current coverage and the U.S. overall. Furthermore, this latest forecast data has been incorporated into the LARC GIS application, which includes granular data-driven annual RevPAR forecasts for over 19,000 unique geographies across the country.   With the new administration in place, uncertainty surrounding economic policy remains. -- Broad-based tariff increases could be a headwind for economic growth and drive inflation higher. -- Increased deportations will weigh on the labor pool, which could be a headwind for economic growth and further impact the U.S. hotel industry’s ability to source staffing. -- Lastly, the expectation for the extension of individual tax cuts and an expansion of corporate tax cuts could be positive for the economy in the near term. However, economists expect those cuts to be funded by increased deficit spending, which will generate additional long-term risk to the economy.   Many are hopeful that 2025 leisure demand growth will resume, fueled by an improving U.S. consumer (once the dust settles from the chaotic tariff situation) and soft comparisons. Corporate transient demand is expected to remain solid in the near term as pent-up demand from the election cycle is unlocked in the first half of the year. However, our positive short-term outlook for corporate transient demand growth moderates as the year progresses, limited by sluggish job growth and corporate profit declines. Group trends remain strong, contributing to a base level of demand that will further support pricing power. Nationally, we estimate that the convention center booking pace is up 4% on a year-over-year basis in 2025, following the 3% increase in 2024. For 2025, U.S. RevPAR is expected to increase by 3.1% to $103.02, driven by ADR growth of 3.7% to $164.54 while occupancy declines 0.6% to 62.6%. LARC forecasts U.S. Hotel EBITDA to increase 1.8%, with slight margin erosion, and Hotel Values to increase 3%. Over the next five years, LARC expects Hotel Values to increase by a total of 8%. #HospitalityIndustry #RevPAR #HospitalityMarketTrends  

🔍 Latest Booking Trends in UK Hospitality – 2025 The UK hospitality sector is evolving fast. Here’s what’s shaping bookings, demand, and investment strategies right now: 📈 1. Inbound Travel is Up, but Capacity is Tight ✈️ International tourism to Europe is set to grow 3-5% in 2025, with strong demand from Asia-Pacific and the U.S. ⚠️ But airline capacity constraints (ongoing aircraft production delays) may limit growth potential. 📌 Source: Hotel Financing & Investment Outlook 2025 🏨 2. Luxury & Economy Segments Lead Demand 💎 Luxury hotels remain resilient, as high-end travellers continue to pay premium rates. 💰 The economy segment is also growing fast (105% of 2024 levels) as cost-conscious travellers seek affordability. 📌 Source: Cushman & Wakefield 💼 3. Business Travel is Recovering – Slowly 📊 Corporate travel is up 30% vs. 2023, with conference and meeting bookings rising. ✈️ Airfares remain high, despite lower oil prices, due to supply shortages. 📌 Source: UN Tourism Confidence Index 🏦 4. Alternative Financing is Reshaping Hospitality 💳 Private debt & sovereign wealth funds are filling funding gaps, especially in prime UK assets. 🏢 Hotel conversions (office-to-hotel projects) are on the rise as investors seek value-add opportunities. ♻️ Sustainability-linked financing is gaining momentum for new projects. 📌 Source: Deloitte European Hotel Investment Survey 2024 🔗 5. Distribution Channels Are Evolving 📲 Direct bookings are growing, but OTAs (Booking.com, Expedia, Skyscanner) still dominate inbound travel. 💳 Fintech disruptors are changing payments, offering frictionless transactions & dynamic pricing models. 📌 Source: UKHospitality & RSM UK 💬 What trends are you seeing in UK hospitality? Are you adjusting your strategy to match these shifts? #UKHospitality #HotelTrends #TravelIndustry #BusinessTravel #LuxuryHotels #EconomyHotels #HotelInvestment #HospitalityFinance #Fintech #BookingTrends

CRE in 2025: Challenges, Shifts, and Opportunities The Q1 2025 commercial real estate data shows a market still finding its footing. Transaction volumes are at their lowest levels in over a decade—but prices in several sectors are holding steady or even rising. Key trends: Hospitality: +15% YoY Retail: +5% YoY Multifamily: +4% YoY Office: +3% YoY Industrial: Slight decline While the overall environment remains uncertain, these numbers highlight that certain asset classes are proving resilient. For long-term investors, periods like this can present opportunities—particularly in sectors with strong fundamentals. The takeaway? Conditions may not be perfect, but history shows that strategic acquisitions during slower markets often produce outsized returns when momentum returns. Full article link:

The Expanded NCREIF Property Index shows office property values fell for the 13th straight quarter in 25Q2, exceeding the duration of declines during the GFC (8 quarters) and early 2000s (12 quarters). But the geographic breadth of this depreciation is shrinking. The number of markets with depreciation peaked at 53 in 23Q4 and has declined every quarter since then. In 25Q2 there were 34 markets in negative value growth territory, the lowest number in three years. The flip side of this analysis is that office values rose in 23 markets in 25Q2, up from just six markets in the same quarter a year ago, and the most since 29 markets had appreciation in 22Q2. Some office markets are beginning to find their footing, but very few are experiencing a clear positive trend. In the past four quarters, no markets have experienced four quarters of appreciation, and only eight have had three quarters of appreciation. However, there are 13 markets where office values rose in two of the past four quarters. The office sector’s recovery is likely to be slow and bumpy, with meaningful differences in performance across markets and subsectors. What factors are you seeing that drive these differences and how are you trying to identify markets and assets that will lead the sector in the years ahead?