Residential and commercial rents in Abu Dhabi dropped marginally in the first quarter of 2009, as a result of the global economic downturn, but performed better than other GCC states in the same period. The decline has been in line with capital values.
The Abu Dhabi Report for Q1 2009 issued today by Asteco, the UAE’s largest property services company, showed that a limited supply of residential and commercial units was responsible for the high demand for quality apartments and offices. This, coupled with companies reducing the accommodation component of staff salaries, has impacted the tenant’s ability to rent at current levels.
“Currently, the Abu Dhabi residential market has insufficient quality apartments to match market demand,” said Andrew Chambers, Asteco’s Managing Director. “By early next year, we expect an additional 5,000 high-end residential apartments to be available in the market, along with a number of villas. This will allow tenants increased choices and flexibility to negotiate more favourable terms with landlords.”
Abu Dhabi is currently witnessing an improvement in supply with an increase in availability of residential apartments in the Corniche, Hamdan Street, Passport Road and Muroor areas due to tenants moving out of the country. Residential apartments in Khalidiya and Corniche are in high demand and continue to command a premium. Average annual rents in Khalidiya and Corniche for one-bedroom, two-bedroom and three-bedrooms stood at Dhs170,000, Dhs252,500 and Dhs350,000 respectively.
The residential market in Abu Dhabi is controlled by local investors, the Khalifa Committee and expatriate investors. While local investors are hesitating to lower their prices on vacant units, expatriate owners have dropped their apartment rents by as much as 20 per cent than that offered by other landlords. The majority of tenants who are currently playing high rental rates are seeking better value for money and possibly look to rent superior quality apartments on Al Reem and Al Raha, where the first of the units are due for handover at the end of the year.
Villas in Khalidiya and Bateen continued to command high rents with 3-bedroom, 4-bedroom and 5-bedroom villas being leased out at an average Dhs365,000, Dhs 410,000 and Dhs475,000 respectively. 2009 will see an additional number of villas being available in Al Raha Gardens, Golf Gardens, Al Reef and Khalifa City ‘A’ , bringing a fresh supply of new units to the market.
In terms of commercial rentals, Abu Dhabi is witnessing a strong demand for Grade A office units while offices with substandard finishes and amenities have reported a decrease in rents. Office spaces have registered a drop of 27 per cent on Defence Street and Muroor, and 25 per cent on Passport Road.
Office tenants have also shown a greater preference for smaller fitted offices and would be willing to pay a premium on current market rental rates. Demand is greater for office space between 50 and 100 square metres. Asteco also anticipates a fall in demand for large office spaces, as some of the bigger companies move into their own purpose-built offices.
Al Ain’s residential villa market continued to remain stable in the first quarter, with Al Towaya continuing to command the highest rental rates for four and five-bedroom villas at an average AED 107,500 and AED 119,500 respectively. Apartment rental rates have been steady in Q1 2009 and have achieved the levels reached in Q4 2008.
Rental rates for one and three-bedroom apartments in Al Jimi commanded the highest rental rates with the imminent opening of Al Jimi Mall in the neighbourhood. Projects such as University Town, Al Ain Wahat Hili, Al Ain Industrial Park and numerous post offices currently planned or under construction will drive the city’s residential market and will introduce a wider range of choices in the city, where the population is expected to grow at 21 per cent over the next five years, according to the Plan Al Ain 2030 unveiled by the authorities earlier this month.
The region’s retail market has moved strongly with Khalifa Street showing 51 per cent growth over Q4 2008. The retail rental rates in Khalifa Street and Al Bawadi Mall were the highest with average rental rates at AED 1,400 per square metre.
Compiled and updated quarterly since 2006, Asteco’s research reports include the survey and compilation of residential and commercial rental analysis for each emirate of the UAE.
Founded in Dubai in 1985, Asteco is the UAE’s largest property services company. Its services include retail, commercial and residential sales and leasing; strategic consultancy; property management and marketing; feasibility studies and valuations; and research and investment.
