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A Jones Lang LaSalle (JLL) report says that there were no major deliveries in the Abu Dhabi office market last quarter, with the total stock remaining stable at 3.1 million sq.m. It added that the leasing of Sowwah Square remains on hold as the government progresses its plans for the new financial free zone, Global Marketplace, on Al Maryah Island. While there remains demand for small units of space from the private sector, most of the huge requirements are from government-related entities, many of which are building their own projects.
Asteco's research on Sowwah says that the rental rates remained unchanged in the last 12 months. Although there is a healthy tenant interest, leasing has been on hold due to the confirmation of the free zone status, which is still pending. If the free zone status is granted, leasing will restart and an increase in rental rates is likely.
Asteco reports that rental rates for Grade A office space saw small increases of 3% and 4% for fitted, and shell and core offices, respectively. Landmark Tower in Corniche achieved net effective rental rates estimated at Dh1,700 per sq.m. for fully fitted space. The market for Grade B office space, recently built or existing, witnessed no change in rates compared with the previous quarter. This is because there were no significant additions in the second quarter. This extended period of rent stability has become a relief to landlords under sustained pressure since 2009.
Furthermore, Asteco researchers say fitted office space in new buildings offering better quality finishes and more efficient space, with amenities such as covered parking, access to retail and amenities, continue to be in demand. Despite the rent cap removal, there have been no significant increases in rental rates for older office stock in the second quarter. There is an anticipation that the removal of the rent cap could, over time, lead to companies that had remained where they are for years due to low rents to relocate to a better quality Grade B office space. This would be especially pronounced in poorly managed buildings where landlords are reluctant to negotiate.
• Leasing in Sowwah Square on hold due to pending free zone status
• Rental rates for Grade A office space witnessed 3 to 4% increases
• Office space in new buildings with better amenities in high demand
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Source: Urmila Santosh, Special to Properties
The writer is a freelancer