Demand across Abu Dhabi commercial property market rises

Demand across Abu Dhabi commercial property market risesImage Credit: Supplied

Demand for space across Abu Dhabi's commercial real estate market is increasing on the back of economic growth led by the hydrocarbon sector, according to the latest report by property consultancy, Cluttons.

The Winter 2014 Abu Dhabi Commercial Market Outlook report shows growth across emerging sectors including aviation, education, and health care, along with continued growth in the hydrocarbon industry. Such growth is driving increased demand for office and industrial space in the capital.

Top-tier rents in Abu Dhabi's office market have held steady once more this quarter, with Grade A and super prime space seeing a high level of interest from occupiers, who view the current rates of nearly Dh1,850 per square metre to Dh2,000 per square metre as fair value.

Matthew Green, head of research and consultancy at CBRE, a global real estate advisor, commented on the overall real estate market in Abu Dhabi saying that it has improved this year, with the exception of the office market.

''2015 is likely to be another good year for the capital with an improving picture across all sectors. Even the office sector, which has seen a relatively flat year, is expected to see a return to rental growth for prime properties with occupier demand for high quality accommodation on the rise as the market experiences a sustained flight to quality,'' he said.

He added that tumbling oil prices might echo into the real estate sector, and if the drop continues, it will cause a slowdown in public spending.

With Grade A schemes operating at nearly full occupancy, the supply pipeline for top-tier spaces is relatively weak, resulting in demand being transferred to the secondary and tertiary markets. For the first time in 18 months, space in secondary and tertiary markets is recording an increase in rents.

''We expect this trend to gather pace, with a widening gap in rents in these developing segments of the office market. This is already being reflected in asking rents. During Q3, rents for secondary space increased by eight per cent to Dh1,300 [per square metre], while tertiary rents climbed to Dh900 [per square metre], which translates into a 13 per cent increase on Q2,'' said Faisal Durrani, Cluttons' international research and business development manager.

He added that there is stock of office space in the secondary and tertiary markets in prime areas of Central Abu Dhabi where Grade A space is limited.

The report also highlights the continued growth of Khalifa Port at Khalifa Industrial Zone Abu Dhabi (Kizad). The growth was fuelled partially by the Abu Dhabi Ports Company's decision to gradually divert cargo away from Zayed Port to make way for a cruise terminal.

The expansion in Kizad is expected to bring in higher occupier activity over the next few years, which, in turn, will drive up rents, according to Cluttons.

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Source: Sarah Diaa, Staff Reporter,

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