Abu Dhabi real estate market remains stable

Abu Dhabi real estate market remains stable
Updated 27 July 2015

Abu Dhabi real estate market remains stable

Abu Dhabi real estate market remains stable

ABU DHABI: Jones Lang LaSall (JLL), the world's leading real estate investment and advisory firm, Monday released its second quarter (Q2, 2015) Abu Dhabi Real Estate Overview report that assesses the latest trends in the office, residential, retail and hospitality sectors.
David Dudley, international director and head of Abu Dhabi Office at JLL MENA, commented: “The general trend for Q2 and indeed the first half of 2015 has been stability, with performance of most sectors remaining flat, and a slight increase in hospitality performance.”
He commented: “Following a two-year bull-run we are currently going through a period of mid-cycle stabilization. This is primarily driven by a slowdown in the pace of demand growth, but with short-term supply completions under control the market conditions are stable. The softening of demand principally stems from the decline in oil prices, which has directly affected Abu Dhabi’s dominant petro-chemicals sector, and also lead to a reduction in domestic government spending as the government re-prioritizes its projects, and a decline in investor sentiment.”
“We still expect demand growth to continue, but at a slower pace. Employment creation and residential demand growth will continue to be sustained from projects commenced while oil prices were high — with projects such as the airport and Etihad expansion having an economic multiplier effect. However the extent to which conditions remain stable over the next year or so very much depends on the government’s spending plans. With an increasing cost of living and a reduction in demand, we are currently at a ‘tipping point’, with market stability very much dependent on the government continuing to invest in to major new infrastructure and economic development projects.”
He added: “Further key developments this quarter have been the government announcing new laws. The long awaited real estate laws have now been announced and are set for implementation, including provision for a new Real Estate Regulatory Authority and new regulations affecting escrow accounts, land and property registration, strata law, the licensing of real estate activity and new fees and procedures. This will particularly affect speculative residential development.”
He said: “The Abu Dhabi Global Market is further progressing plans for Abu Dhabi’s financial free zone, issuing its draft Financial Services Regulations for public consultation. A key implication of these draft regulations is to restrict financial activity to non-Dirham trading to attract new demand rather than competing with existing local businesses.”
Total office stock reached approximately 3.2 million sq m GLA in Q2, with the delivery of new space at Masdar City, Abu Dhabi International Airport and Capital Centre adding 48,000 sq m GLA. An additional 140,000 sq m of office GLA is expected to enter the market throughout the year.
Demand for office space has generally remained flat this quarter due to the decline in oil prices directly impacting the oil related sector and indirectly impacting other sectors due to a slow-down in government spending.
In spite of weak demand, Grade A office rents have remained stable due to minimal vacancies within Grade A stock, with average Grade A and B office rents remaining at AED1,730 per sqm and AED1,180 per sqm respectively.