Abu Dhabi Commercial and Residential Rents Set to Fall, Report



Abu Dhabi’s rental deflation on the commercial and residential markets is predicted to continue in the course of 2013. That was reported by a recent research prepared by CBRE Group Inc.

According to the study, the rental drop can be explained with the continuing increase in the amount of total property stock. The many cheaper housing options have also lead to a lower tenant loyalty.

On the average, residential rents has decreased with around 3% during Q1 2013 compared to Q4 2012. Also, the report states that by the end of this year, the construction of another 17,000 new properties will be finalized. In addition, from CBRE Group Inc. expect that office vacancies in Abu Dhabi to jump and hit the record 35%. That will be a result of firms’ reduced costs and halted expansions caused by fears that have to do with the slow-paced economic growth.

Currently, the government of Abu Dhabi is doing its best to stimulate the market on which housing prices have decreased their value with 50% as a result of the global credit crisis. It instructed its workers to settle in UAE’s capital in order to be able to apply for residential property allowance. Still, the majority of employees live in Dubai because of the lower housing rents.

Another thing mentioned in the report is that residential property sales in Abu Dhabi depend on the occupiers. In addition, the study points that investment activity rates in the city are extremely low. Prices have dropped to an average of $2,500 (AED9,150) to $3,700 (AED13,500) per sq. meter. The majority of property owners do not want to further reduce these prices and prefer to hold the units for an indefinite period of time.

The study recorded no change in the rents of prime offices in Abu Dhabi. They continue to vary between an annual of $440 (AED1,600) to $520 (AED1,900) per sq. meter. Also, they are commonly offered with a few extras among which two months of free rent every year.

Offices in Abu Dhabi’s secondary developments, on the other hand, and recording a fall in rental prices of about 3% in Q1 2013. The research adds that now annual rents are between $185 (AED675) and $340 (AED1,250) per sq. meter.

The report informs that the interest of Europe- and US-based companies to the local commercial property market is presently reviving. Moreover, from CBRE Group Inc. predict that this trend will not change and that it will only become stronger.

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