Abu Dhabi core office rents continue slide
Abu Dhabi, August 7, 2014
Despite experiencing a drop in the vacancy rate to 30 per cent, rents for Grade A shell and core offices in Abu Dhabi continued to trend down in the first six months (H1) of this year, falling by 3 per cent, a report said.
This outturn was surprising given that Abu Dhabi’s market-wide vacancy rate fell sharply from 35 per cent in H2 2013 to 30 per cent in the subsequent six months, added the latest market report released by Knight Frank, a major real estate consultancy.
This was primarily due to the fact that the majority of total take-up in H1 2014 was in the prime segment, where rents stabilised, the report said.
However, the fall in the overall vacancy rate was underpinned by significant uptake in the prime segment, with approximately 100,000 sq m of office space absorbed across the developments that the consultancy tracks between H2 2013 and H1 2014.
Office uptake in the first six months of this year was primarily driven by financial and oil and gas firms, as well as government and government-related entities. In fact, the former two sectors were responsible for around 32 per cent of the total take-up in the first half of 2014.
The public administration sector is an important contributor to Abu Dhabi’s non-oil economy and accounted for another 19 per cent of absorption in H1.
Over the same period, real estate (11 per cent), general trading (9 per cent) and leisure and hospitality (9 per cent) firms also expressed healthy interest, while technology, medical, professional services, construction and engineering and “other” sectors accounted for the remaining 20 per cent of total enquiries. Lack of office availability in the 100-250 sq m category hampers activity.
Around 41 per cent of all recorded enquiries in the first half of 2014 were for offices with a net leasable area of less than 100 sq m, while another 35 per cent were for units sized between 100 sq m and 500 sq m.
However, the lack of availability of Category A offices in the 100-250 sq m bracket meant that activity in the latter category was lower than it would have been otherwise. The remainder of demand (24 per cent) was for space sized 500 sq m or above.
Not only was the quantum of newly completed space in the first half of 2014 limited, it was also quickly absorbed by government departments or owner- occupiers. For example, the NBAD Building at Capital Centre is owner- occupied and the Siemens Building at Masdar City was 100 per cent pre-let.
Elsewhere, the recently completed Al Badie Tower is currently in the process of being leased up. Moreover Al Hilal Building – currently under construction and due to be completed in the second half of 2014 – will be the first commercial office building to be handed over on Al Maryiah Island since Sowwah Square.
According to reports, it has been fully pre-let. In Masdar City, the Siemens building is fully leased, while the Courtyard building has reached an occupancy level of 99 per cent.
Moreover, around 25 per cent of the newly completed Masdar HQ building has been pre-let to the International Renewable Energy Agency (IRENA) and the remaining space is attracting strong interest from large institutions, according to the Knight Frank report.
With occupiers continuing to favour new master-planned communities, demand for office accommodation at Masdar remains strong. This isn’t surprising given that it benefits from access to residential developments and local amenities, as well as good connectivity to Dubai and Abu Dhabi International airports, the report said. – TradeArabia News Service