Abu Dhabi residential rates fall on oversupply
Abu Dhabi, April 14, 2013
Residential rates in Abu Dhabi have fallen over the past 18 months due to oversupply and low demand, especially in older areas which continue to experience falling rents as people upgrade to more modern developments, a report said.
The fall in rents has helped to encourage people who commute to Abu Dhabi from Dubai for work to relocate to the capital, especially whilst rents increase in Dubai, added the Q1 2013 market report for Abu Dhabi released by Cluttons, a real estate specialist.
Since October 2012 there have been a number of large-scale announcements, demonstrating Abu Dhabi’s commitment to its economy and real estate sector, the report noted.
The merging of developer giants Aldar and Sorouh, twinned with the announcement that Abu Dhabi’s Executive Council plans to add Dh330 billion ($89.8 billion) into the economy and infrastructure over the next five years, have provoked a feeling of optimism in the real estate sector.
In September 2012, the government announced that all its employees and those of government-affiliated companies must live in Abu Dhabi, which has helped to drive residential demand.
Since Q4 2012, the Abu Dhabi residential market has shown increased demand in areas offering community lifestyle with a high quality finish. Values and rents have risen in these particular pockets of the city, defying the general trend across the Emirate.
For example on Saadiyat Island, rents have increased by 25 per cent on two bedroom apartments, where the current average rent is Dh145,000 per annum, and Al Raha Beach has seen a 22 per cent increase for two bedroom villas, which currently average Dh160,000 per annum.
Capital values, however, have not seen nearly the same growth levels as those in rentals, with villa prices experiencing a plateau and apartments seeing minor improvements of just 0.75 per cent, said the report.
The general supply of office space within Abu Dhabi has increased over the last six months and demand for Grade A office premises has improved, keeping rents relatively stable.
Aldar HQ and Etihad Towers are all demonstrating occupancy levels over 70 per cent. Government bodies and their affiliated companies still form the majority group seeking large office space while SMEs in the private sector have been helping to fill vacant space in existing stock.
Cluttons expects that older office buildings will experience downward pressure on rents, as corporate tenants look to relocate to modern premises as new office stock is released onto the market.
The retail sector is expanding continually, with the extension of Al Wadha Mall, the opening of Deerfields Mall, Emporium Mall at Central Market and The Galleria at Sowwah Square. As further retail space is released to the market over the next two years, it is expected that retail rents will become more competitive as malls compete for business.
The general expansion of the Abu Dhabi International Airport is expected to boost both the retail industry and tourism sector. Abu Dhabi is developing a reputation as a regional tourism hub with the continued development of Yas and Saadiyat Islands. Yas Waterworld has recently opened, Yas Mall is under construction, and the redevelopment of Yas Marina will be ready just in time for the 2013 Formula One.
Construction works have now began for the Saadiyat Cultural District, which will comprise three world class galleries and museums, including the Louvre, The Guggenheim, and Zayed Museum.
The industrial and logistics market is trading at a premium to Dubai and the industrial zone KIZAD, the cornerstone of Abu Dhabi 2013, is leasing plots at a record-breaking rate as the infrastructure is almost complete. Also close to completion is the Al Markaz large-scale warehouse project, which is progressing well and offering competitive prices. – TradeArabia News Service