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Abu Dhabi: The impact of falling oil prices on job creation in Abu Dhabi is likely to be offset by a boost in efforts for economic diversification, according to the latest report by Cluttons, a real estate consultancy firm.
Other cities in the UAE such as Dubai and Sharjah have already seen a curb in rental growth recently, with demand stabilising.
“With oil prices fluctuating around the $50 (Dh184) per barrel mark, we are likely to see this start to impact the rate of job creation in the oil and gas sector as the year progresses and hydrocarbon-linked firms begin reassessing their growth plans,” said Steve Morgan, chief executive officer of Cluttons Middle East.
In the office market, demand remained lopsided and centred on prime stock, which is still short in supply. Demand, however, is stable, leading to upward pressure on Grade A rents across the city, according to Cluttons’ Spring 2015 Abu Dhabi Property Market Outlook report.
Grade A office space
Currently, the performance of the office market is very much dependent on demand from oil firms, however.
“The evolution of oil prices over the course of the year will very much dictate how the office market fares not just in Abu Dhabi, but across most Opec [Organisation of Petroleum Exporting Countries] member states,” Morgan added.
Average asking rates for Grade A office space in the capital remained stable at Dh1,850 per square metre in the first quarter of 2015, though landmarks like the World Trade Centre and Nation Towers each saw office prices at Dh2,000 per square metre.
Prices at Etihad Towers were even higher, at Dh2,250 per square metre, registering an 18 per cent increase in rents during the fourth quarter of 2014. Demand is also expected to be strong for the upcoming opening of the Abu Dhabi Global Market Square on Al Maryah Island.
Mathew Green, head of research at CBRE, a commercial real estate adviser, said that the increased supply of office space together with weaker demand will lead to a deflation of rental rates especially among secondary locations.
“Abu Dhabi’s office sector is driven primarily by the government and oil and gas, so I think we have to assume that overall demand levels are pretty weak this year. You may start to see some longer time periods for deals to be completed … generally, it’s probably going to be a relatively weak picture for the office market this year, but that will depend on how long the slump will continue,” he told Gulf News.
He expected the residential market to be relatively strong and stable, though.
In 2014, rents across Abu Dhabi’s main freehold market continued to grow strongly, with Saadiyat Island registering the best performance. Three-bedroom apartments on the island saw a surge of just over 22 per cent in Q4 2014 alone, the report said.
Overall, apartments on Saadiyat saw an 11.2 per cent increase in rents in 2014, with the ongoing delivery of units driving up demand, which is expected to see another boost as the Louvre and Guggenheim museums are completed.
Source: Sarah Diaa, Staff Reporter, gulfnews.com