Abu Dhabi residential rents 'set to fall further'
Abu Dhabi, October 21, 2012
Addition of stock to an already lethargic Abu Dhabi residential market has caused rental and capital values to falter, according to a new report.
The Q3 market report for Abu Dhabi’s property market 2012 by Cluttons, a leading real estate specialist, forecasts that the expected additional release of 38,000 units by 2014 will increase the competiveness of the market and force landlords to offer lower rents and more flexible contact terms.
Capital values of apartments have fallen some 6.8 per cent since Q3 2011 and the villa market to a lesser extent down 3 per cent, it said.
However, Cluttons sees stabilisation in other areas of Abu Dhabi real estate market as diversification takes place.
The IMF recently reviewed its growth projection for the Abu Dhabi economy in 2012 from 4.2 per cent to 5.5 per cent. This could well be a positive reflection of the efforts of the emirate to diversify into a more non-oil based economy, along with the government’s continued investment in major public construction projects including Khalifa Port, which opened in September, and rapid development of projects in Saddiyat, Al Reem and Yas Islands. The Abu Dhabi government has also focussed on leisure and retail as a means to start drawing attention away from neighbouring Dubai.
In the industrial sector, the official opening of the Dh26.2 billion ($7 billion) Khalifa Port in September is set to change the industrial landscape in the region. Khalifa Port’s container terminal has a capacity of 2.5 million container units a year, with an additional 12 million tonnes of general cargo, the report said.
The Khalifa Port acts as the gateway for Kizad Industrial Zone Abu Dhabi (KIZAD), with the objective of the area to support the growth of the Abu Dhabi economy under the 2030 economic vision. Forty companies have reportedly signed on long-term lease agreements for Free Zone and Non Free Zone land plots.
In addition, warehouse units at Skycity, Waha Land and Abu Dhabi Airports Company have also been completed, bringing further supply on to the market. Across the capital industrial rents have remained stable since Q1 2012 at Dh46 (USD 13) per sq m per annum, the report said.
The retail market is also due to change dramatically over the next 12 to 18 months as two major developments, Yas Mall and Deerfields Mall, are released along with the extension of Al Wahda mall and the release of Emporium at Central Market, bringing 300,000 sq m of new retail space to market by the end of 2012. The two developments which are presently competing directly for international brand interest are Etihad Towers and Sowwah Square, the former of which has secured Tom Ford, Chloe and the first Paul Café in the capital and is 80 per cent pre-let, it said. Currently, prime mall space is achieving top rental rates of Dh3,500 to 4,000 ($953 to 1000) per sq m per annum as opposed to an average of Dh2,800 (USD 762) per sq m per annum in most retail spaces.
Office rental levels have remained static over the past 12 months, with net prime rents achieving Dh1,800 ($490) per sq m per annum. Headline rents remain higher but landlords are offering rent free incentives in the established Grade A developments of as much as 6-9 months for a five year lease. Again in this sector, Etihad Towers and Sowwah Square are both leading well in a still suppressed market.
The residential market has remained stagnant in 2012. Approximately 3,000 residential units have been released into the market in Q3 2012, most of which represent apartment developments. Take up of projects such as TDIC’s St Regis apartments on Saadiyat Island have proved popular, highlighting demand for well-planned developments offering a community lifestyle with high-end facilities, the report said.
Cluttons foresees that in 2013 industrial rents will remain stable across Abu Dhabi and that further opportunities and growth will result from the launch of KIZAD. Retail and office space prices will depend on the development; with tailored, well-serviced buildings maintaining their prices while others may stagnate or soften. Residential rental values on the other hand are likely to soften further as a result of the huge increase of stock coming online in the next two years. – TradeArabia News Service