Abu Dhabi rents to continue to fall

30 November 2010

Residential and commercial rents have fallen and are expected to continue to decline

Rents in Abu Dhabi have continued to decline with some areas more significantly affected than others. Areas especially affected are those with new supply being delivered. This oversupply and better quality in Dubai have been the contributing factors to the downward trend. The capital is also struggling to compete with Dubai on infrastructural issues like traffic, parking and schools to optimise demand.

According to a report published by Landmark Advisory developments like Al-Bandar and Marina Square have the potential to upset the market and could lead to “complete recalibration of rents around the new developments”.

The report predicted that rents in Abu Dhabi, especially in “lower quality on-island buildings” will have to fall further to attract demand because of continued falling rents in Dubai and a reluctance on the part of tenants to accepts sub-standard quality at premium rates. This has particularly hit the Corniche area which experienced the greatest fall in rents of 16 per cent which compares to the average decline of 5 per cent.

In terms of villas, Off-island villas have seen the largest decline in rents of 4 per cent overall. In particular Al-Reef villas is reported as the main victim experiencing a 15 per cent decline due to factors such as poor quality, inconvenient location and landlord competition. Limited exceptions to the downward trend do exist such as Golf Gardens which witnessed a marginal increase.

Commercial rents have also declined around 6 per cent since the July report, with on-island commercials rents sharply falling 23 per cent. According to Landmark Advisory, companies are staying in their current properties awaiting further falls and higher quality supply. Landlords have started to increase the use of incentives such as lower lease and longer term rates, increased cheque options and rent free period, which are likely to play a key role in the commercial sector going forward.Despite all this, Abu Dhabi remains on average the most expensive place in rental terms in the Middle East for office and residential space (MEED 24:9:10).

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