Abu Dhabi commercial space conundrum

Maryah Plaza on Al Maryah Island will have high-end offices along with a five-star hotel, spa, serviced condominiums and premium apartments / Image Credit: Gulf News ArchivesImage Credit: Archives, gulfnews.com

With many messages in the market about office rents, sales prices and availability, it can become a minefield of conflicting information. In a local market where everyone is a real estate expert, who do you trust to advise you on an office lease or acquisition? When looking to acquire office space, things to consider to make the right decision include the associated costs of fit-outs and the regulatory requirements in an ever-changing market.

Abu Dhabi’s commercial real estate market has transformed in recent years. An independent advisor is therefore imperative to guide you on matters related to the best buildings, landlords, parking, vertical transportation and building management.

Vacancy rates in the emirate rose sharply from 26 per cent in 2012 to 33 per cent in 2013, with downward pressure on Grade A shell-and-core office rents. We have seen the market stabilise with rents rising for Grade A buildings to Dh1,200 per square metre.

Last year, the capital saw a reversal of the increasing vacancy rates of the past few years with a drop in Prime/ Grade A office vacancy rates to around 23 per cent. Many questions are being raised regarding the implications of the fall in oil prices and the forecast average for this year, and, therefore, the subsequent impact on the com mercial property market in Abu Dhabi. The effects are not immediate, as there is likely a lag in the next fiscal budgets. How these will affect the commercial market will be hard to determine.

In addition, occupiers will have normally secured occupational leases in excess of three years, which means the consolidation of office accommodation would not be immediately felt in rental values or vacancy rates. Therefore, only hesitation from existing occupiers, which have expansion plans in the emirate, and new entrants, which tend to be smaller occupiers, will affect the market take-up.

With office developments now completed in new off-island investment zones, more opportunities are being created in the market. However, strata properties need to be fully understood as they will not work for every occupier — generally small and medium enterprises rather than institutional businesses will occupy strata property.

Questions you should ask internally include: Who is the landlord of the unit? How many units or floors do they own within the building? Can your business grow with the same landlord, or will you need to lease from another?

Risks across the board

Having multiple landlords can cause issues during rent reviews, renewals or terminations. Therefore, you need to consider who the developer is and who is managing the building.

With several stakeholders who have vested interest in the property, you need to be clear on the potential pitfalls in leasing in a strata building and delays in the fit-out process, if these are not clearly provided in the ten-ant’s handbook.

From an 18-sq-m space, which costs around Dh25,000 per year, to a 4,000-sq-m acquisition by a blue-chip firm, the challenges and risks are the same, so be guided on what works best for your organisation and don’t allow yourself to be forced to make a decision.

Abu Dhabi now offers Grade A/CAT A offices on Al Maryah Island, the pre-eminent financial business location and home to the Abu Dhabi Global Market. Or you could relocate to Mohammad Bin Zayed City. There are now offices to suit different location and budget requirements.

Parking is among the many hindrances faced by occupiers. The Department of Transport requires new buildings handed over after 2008 to allocate one car parking space for every 50 sq m of office space. This is never enough for employees and, therefore, reviewing street parking options as well as public transport accessibility is important.

Understanding the merits of any shell-and-core office or CAT A fitted office (raised flooring and suspended ceiling) provided by a landlord will need to be factored in, along with the budget and time expectations. Don’t automatically assume fitted offices will save you time and money.

Registration matters

Ask your agent for advice on the best fit-out firms and ensure you review their track record. Check if they have previously delivered projects on time and within the budget.

In recent years there have been changes in the procedures, including the introduction of Tawtheeq (similar to Dubai’s Ejari), where all leases have to be registered online by the landlord. This new process is critical to any tenant when applying to the authorities and the Abu Dhabi Distribution Company for utility connections.

Make sure your real estate consultant can confidently discuss the whole leasing process with you, provide sound advice and guide you through the process. No business can afford to make a mistake when acquiring property, so careful consideration must taken, as one would when purchasing a house.


Source: Matthew Dadd, Special to Property Weekly

Matthew Dadd, Partner at Knight Frank, specialises in the Middle Eastern commercial real estate market.

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