Abu Dhabi office rents continue fall, but outlook may be better next year

Knight Frank particularly noted the increasing appeal of the Abu Dhabi Global Market area, above, to possible corporate tenants. (Courtesy Abu Dhabi Global Market)
Updated 19 October 2017
0

Abu Dhabi office rents continue fall, but outlook may be better next year

DUBAI: Average office rents in Abu Dhabi continue to fall but recent macroeconomic data could translate into a more optimistic outlook for the sector next year, property consultancy Frank Knight said.
In the year to third quarter, average grade A rents across the city have fallen by 11.5 percent, Frank Knight said. Prime market rents on average stood at Dh1,774 per square meter annually, grade A at Dh1,150 per square meter and citywide rents at Dh1,167 per square meter.
“On the back of continued sluggish economic performance, Abu Dhabi’s occupier rental rates continued to trend down across all segments of the market. With weaker demand from the public sector and oil sector firms being the most significant factor underpinning the trend,” Knight Frank said in its report.
“Activity in the market continues regardless of these major cutbacks, however the vast majority of space requirements are in the 100 sqm to 500 sqm range with general trading and professional trading firms making up the majority of demand.”
Abu Dhabi’s non-oil sector was forecast to register higher growth rates, which can compensate for the current weakness in the hydrocarbon sector, while OPEC’s oil rebalancing was underpinning crude prices and may eventually support a possible reversal of job cutbacks in the government and oil industries. The two scenarios could work out well for the office rental market in Abu Dhabi, Knight Frank indicated.
Knight Frank also said vacancy remained stable as of the third quarter at 23 percent, and with supply forecast to go up by another 80,000 square meters next year, the overall vacancy rate was expected to increase slightly.
“The short to medium term outlook for Abu Dhabi’s office market remains negative, however we expect that not all of the forecast supply will come to fruition,” the property consultant said.
“The slowdown in new supply could provide a floor to rental values across
the capital in the long run. This is particularly the case in the Prime and Grade A segment, where supply is already somewhat limited,” it added.
Knight Frank particularly noted the increasing appeal of the Abu Dhabi Global Market area to possible corporate tenants after the emirate’s financial free zone approved the use of private Real Estate Investment Trusts (REITs) as Qualified Investment Funds.
“Given the recent increase in appetite in the region for REIT exposure, this may foster an increase in demand for office space within the ADGM,” it said.


Australian telecom giant Telstra to cut 8,000 jobs

Updated 7 min 10 sec ago
0

Australian telecom giant Telstra to cut 8,000 jobs

SYDNEY: Australia’s dominant telecommunications company Telstra Wednesday announced plans to axe 8,000 jobs — a quarter of its workforce — as part of a drastic new strategy to cope with an increasingly competitive industry.
The decision by the company, one of Australia’s largest employers, is part of a shake-up targeting an extra Aus$1 billion ($750 million) in cost-cutting by 2022, on top of Aus$1.5 billion previously announced.
To create a leaner operation, it will also split its mobile and infrastructure divisions into separate businesses.
“We are creating a new Telstra that is able to continue to lead the market,” said chief executive Andrew Penn.
“In the future our workforce will be a smaller, knowledge-based one with a structure and way of working that is agile enough to deal with rapid change.
“This means that some roles will no longer be required, some will change and there will also be new ones created.”
The cuts come less than a month after Telstra said its 2017/18 earnings will likely be at the bottom of its guidance range of Aus$10.1 billion to Aus$10.6 billion, blaming increasing competition in mobile and fixed broadband.
The warning sent its shares tumbling to a more-than six-year low of Aus$2.71.
Telstra employs 32,000 people across 20 countries, according to its most recent annual report. Of the jobs to go, one in four will be executive and middle management roles.
Penn said the company had to take action to stay on top in a highly competitive market.
“The rate and pace of change in our industry is increasingly driven by technological innovation and competition,” he said.
“In this environment traditional companies that do not respond are most at risk.
“We have worked hard preparing Telstra for this market dynamic while ensuring we did not act precipitously. However, we are now at a tipping point where we must act more boldly if we are to continue to be the nation’s leading telecommunications company.”

Telstra has a range of businesses including fixed broadband, mobile, data and IP, network application and services, digital media and international.
Part of its new strategy will see it create a wholly-owned standalone infrastructure business unit from July 1.
Called Telstra InfraCo, it will comprise the telecom’s fixed-network infrastructure including data centers, non-mobiles related domestic fiber, international subsea cables, exchanges, poles, ducts and pipes.
Its services will be sold to Telstra, wholesale customers and Australia’s National Broadband Network, controlling assets with a book value of about Aus$11 billion.
“As technology innovation is increasingly relying on connectivity, the role of telecommunications infrastructure is becoming more important,” said Penn.
“There is virtually no technological innovation happening today that does not rely on a high-quality, reliable, safe and secure telecommunications network.
“In this world our infrastructure assets are becoming more valuable. By creating a new infrastructure-focused business unit we will better optimize and manage these assets.”
Telstra also intends to “monetise assets of up to Aus$2 billion over the next two years to strengthen the balance sheet,” and has set aside Aus$600 million in restructuring costs.