- Abu Dhabi real estate to remain stable
- Rents increased by four per cent year-on-year
During the first half of this year Abu Dhabis real estate market continued with a period of stabalisation across all asset classes, according to a mid-year report produced by US-based real estate firm JLL.
Demand has slowed down across the emirate as declining oil prices continue to impact the hydrocarbon industry itself, leading to a reduction in government spending and general market sentiment.
The office segment has been the most affected with a slowdown in the oil sector and government investment. Despite this, the report goes on to say that grade A rents have remained stable due to limited supply in quality stock.
The report adds that total office stock across the capital reached 3.2 million square metres by the end of the second quarter of the year. An additional 140,000 square metres expected to enter the market by the end of the year with 315,000 square metres expected by the end of 2016.
With a slowdown in the oil sector and a short-term dampening in government spending, the market is dependent on new economic development initiatives to grow demand says the report.
A positive is that Abu Dhabi Global Market Square, the new financial freezone under development, has already started offering units for lease on the open market, at AED3,700 a square metre. It is expected to attract financial institutions looking to enter the Abu Dhabi market. Although this will give the high-end office sector an alternative market segment away from oil companies to attract, it is too early to say whether this will have a positive impact on occupancy and rates.
For the residential segment, rents have remained stable despite a continued decline in transaction volumes, which is mostly fueled by dampened sentiment.
Despite this, apartment rental rates for prime locations are rising with a six per cent increase in rents in the last quarter. The majority of prime, high and mid-quality developments increased by four to six per cent upon contract renewal, whereas new leases were 8 per cent higher than the first quarter of 2015, according to a report released this month by local real estate firm Asteco.
The JLL report states that no new major deliveries took place during the second quarter with 6,000 units expected to enter the market by the end of the year. This is dominated by the delivery of the Views in Saraya, Hydra Avenue and The Wave on Reem Island.
Further to this, new Dubai-like regulations which are expected to be formally implemented by the end of the year will have a big impact on the market.
The report states: The new laws will require all real estate developments and sales transactions to be registered with the government and will provide new mechanisms to protect consumers and investors. The new laws will place new obligations on developers which may slow down supply, particularly for small developments.