Abu Dhabi’s office realty takes oil weakness in its stride

Abu Dhabi’s office realty takes oil weakness in its strideImage Credit: Supplied

Abu Dhabi’s office market looks to have taken the oil price slide in its stride, at least for now. Though there was a ‘marginal’ dip in the number of enquiries from prospective tenants during the second half of last year, vacancy rates for ‘prime’ and ‘Grade A’ offices were down to a manageable 26 per cent, according to a new update by Knight Frank.

More than anything else, the limited upcoming office supply means the office market has got an inbuilt cushion to dictate supply and demand in the near term.

“Regardless of economic trends, Abu Dhabi real estate continues to offer a good depth and breadth of opportunities for occupiers,” said Matthew Dadd, who handles the firm’s commercial leasing operations in the emirate.

According to the report, “Commercial property should be able to shrug off concerns as the region’s medium to long-term prospects remains strong in addition to a limited supply pipeline”. But if the weakness persists, “Abu Dhabi will however see greater implications as the economy (51 per cent of GDP) is still significantly more dependent on hydrocarbons than Dubai. This is important given that large publicly funded, infrastructure-related schemes tend to stimulate construction activity, and thus support growth across the real estate sector.”

Of the enquiries generated during the second half of last year, 80 per cent were for offices in the 100-500 square metre formats. Office rentals did not see any major variations, though “we could witness further improvements in headline rents, as little Prime or Grade A supply enters the market”, the report said. Prime office rents are now around Dh1,800 a square metre, while rental values for Grade A shell-and-core offices have remained steady at Dh1,200.

Major developments too are on the anvil. Just recently, Abu Dhabi Global Market — the newly formed financial centre — confirmed a 50-year lease for the Financial Building on Al Maryah Island. The Four Seasons, Al Maryah is set to open in the second half of this and ‘expand the overall offering on the island’.

“The leisure and hospitality sector witnessed an increase in the number of enquiries, which reflects the government’s efforts in diversifying the economy and growing this sector,” the report added.

Meanwhile, on the residential side, fresh stock keeps getting added at Reem Island.

“Even if residential unit transactions are subdued right now, rental deals are taking place at a healthy clip,” said Niraj Masand, Partner at Banke ME. “Occupancy levels the majority of well-located high-rises on Reem Island should be in the high percentages. The sales price on these units would be in the Dh1,100-Dh1,200 a square foot range.”



Source: Manoj Nair, Associate Editor, gulfnews.com


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