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The residential segment remains one of the better-performing sectors in Abu Dhabi’s real estate sector, even as prime retail developments continue to display stability in both rental and occupancy rates, according to the Q2 2016 Abu Dhabi MarketView by real estate consultancy firm CBRE.
The report said low levels of upcoming supply in the short term sustained prospects in the residential segment, although it also noted a shift in dynamic amid ongoing downsizing across different industries, resulting in weaker demand, specifically for high-end apartments.
More affordable units remain in demand, reflecting the demographic of the vast majority of expatriate workers. Rental rates for affordable units have remained steady with minimal fluctuation against the general slowdown in the upper segments.
“With a growing number of new projects in the longterm pipeline, we expect to see an upward trajectory in annual supply in the coming years, with the bulk majority belonging to properties oriented towards the upper-mid to high-end segments,” said Mat Green, Head of Research and Consulting UAE at CBRE Middle East.
Putting the relatively stable demand-supply dynamic in context, David Dudley, International Director and Head of Abu Dhabi Office at JLL Middle East and North Africa, said, “While demand took a big hit, annual supply completions have been at an all-time low, leading to relatively stable market conditions over the last 18 months — characterised by low vacancy rates in high-quality stock and prime rents generally remaining stable across each asset class.”
JLL said the market is now starting to show initial signs of declining performance. “Demand has been weak since the decline in oil prices at the end of 2014 — impacting the oil sector, government spending and general sentiment,” said Dudley. “During the second quarter, we have started to see the first signs of a downward trend as the decline in the oil sector, reduced government spending and weak sentiment continues. While supply remains stable, the reduction in demand has now started to cause vacancy rates to nudge upwards, indicating we have now reached a tipping point with rents declining for the first time in three years.”
Meanwhile, all major malls in the capital have maintained high occupancy in excess of 95 per cent, as the local population and growing tourist numbers sustained the retail sector’s considerable growth over the past five years.
However, according to the recently published Abu Dhabi Economic Performance Report from the Department of Economic Development, domestic and external economic challenges have impacted consumer confidence.
Source: Property Weekly