Dubai: Abu Dhabi’s office landlords are feeling the heat ... and it has nothing to do with the weather. There is hardly any new take-up of office space in the city, and nor are existing tenants looking to upgrade to larger units or better locations. And this lack of tenant interest is being felt on the rental values, which have dropped 10 per cent compared with the first quarter of 2016, says the new report from Asteco.
“Buildings with limited parking and larger floor areas in particular struggled and landlords continued to sub-divide units and offer reduced rates and incentives to entice tenants,” the report states.
Office rents in Grade B buildings are now at Dh650-Dh930 a square metre, while prime properties with fitted spaces have asking lease rates of Dh1,800 a square metre on average. In the second-half of the year, three major office towers are likely to be handed over, including the ADIB Headquarters on Airport Road, as well as Leaf Tower and Omega Tower, both on Reem Island, and together creating around 180,000 square metres of new stock.
Interesting, there seems to be little similarity between trends witnessed in the Dubai and Abu Dhabi office spaces. Grade A office properties in Dubai are still seeing optimum demand, with some of them being able to secure long-term leases well before they are handed over. Grade B buildings, however, remain under pressure on rates, though the declines continue to be managed well by the landlords.
On the residential side in Abu Dhabi, the depressed sentiments of the last year and more are still very much evident. “Limited public spending, job cuts and a reduction in staff allowances continue to affect, which resulted in apartment rental rate decreases of 8 per cent on average during the last 12 months,” the report adds.
Further pressure
As has been the general trend for some time now, the top-end of the residential space has had the steepest drop, by 12 per cent over the last year. Quarterly changes are “less pronounced”, with decreases of 3 per cent on average.
Delivery of 2,700 new apartments over the last 15 months is putting further pressure on rentals. In fact, the majority of the incoming supply is being offered below prevailing rates to facilitate a higher take-up.
“Approximately 600 apartments were handed over during the second quarter, and more than 2,000 additional units are expected to be delivered over the next six months,” said John Stevens, Managing Director, Asteco. “2017 will continue to be a challenging year for the Abu Dhabi real estate industry.”
As for sales transactions, the levels were low in the first quarter of 2017 and resulted in quarterly and yearly declines of 2- and 4 per cent on average, respectively, Asteco states.
