Issue No 348 - July 18, 2011

Abu Dhabi apartment rents down 10pc

The apartments rents in Abu Dhabi have witnessed a 5 to 10 per cent drop in the second quarter as new supply hit the market compared to last quarter, said real estate specialist Cluttons in its latest report.

The UAE capital's residential apartment market has experienced some significant falls since the first quarter as a steady supply continues to exert downward pressure on rents, Cluttons stated in its second quarter report covering the residential and commercial sectors within Abu Dhabi.

Whilst potential buyers continue to find it difficult to secure finance, which is further holding the market back, the rental market apears to be picking up, with increasing evidence and sentiment that many professionals who commute from Dubai to work in Abu Dhabi, may relocate to the capital over the summer, the report added.

Now seeing Abu Dhabi as a more affordable place to live, it’s hoped they will take advantage of the fall in apartment rental levels, said the property expert.

Some annual rental values in new developments in Abu Dhabi are almost at parity with high-end apartment buildings in Dubai Marina and Palm Jumeirah, it added.

According to the report, the average sales rates in the secondary market were between Dh1,000 to 1,300 per square foot, an average drop of 30 per cent from the original purchase price. The average private freehold villas are selling for between Dh900-1,050 per sq ft, it added

As steady supply continues to exert downward pressure on rents in the UAE capital, some professionals are likley to relocate to Abu Dhabi from Dubai

One of the key points in the report points to a welcome source of secure income from the Emirati Family Housing Programme (EFHP) formulated by the Urban Planning Council (UPC) to provide homes for Nationals.

With a growing Emirati population, and the need to improve housing quality, 30,000 homes for Emiratis in the capital are planned over the next 20 years, and it is envisaged that the properties will be gifted to Emirati families on completion, said the expert.

On the office market, Clutton said the prime rents have slid from the 2008 third quarter peak of Dh3,800 per sq m per annum to Dh1,700 sq m per annum.

The supply of new office space is trending upwards and is projected to increase by 400,000 square metres in 2011, taking the total stock to approximately 3 million sq m by the end of the year, the report stated.

According to Cluttons, the market fundamentals remained upbeat, amid a GDP growth forecast of 3.8 per cent by the end of the year.

The upward supply of office space is expected to lower vacancy levels as absorption rates fail to keep pace with office completions, it added.

Competing against Grade A office space, the Secondary market office stock has experienced a fall in rental rates as poor quality finishes, limited natural light, lack of IT services, and above all, restricted car parking and ancillary facilities for staff and visitors have been a source of frustration, the report pointed out.

However, given the elevated level of vacancy in the market, landlords continue to compete for tenants by offering concessions and flexible lease terms which tenants are taking advantage of, it stated.

At 50 to 150 sq m, most of these requirements continue to be small as companies attempt to establish a foothold in the market. The slowdown has forced developers to reassess their schemes, scale back more ambitious projects and plan product more aligned to the end-occupier, the expert said.

Breaking up floor plates to accommodate these smaller requirements is one such measure landlords have had to adopt to
boost occupancy.

With healthy fundamentals and an increase in the number of companies relocating to Abu Dhabi, we believe that the market will remain tenant friendly with a focus on quality in terms of real estate offering, it added.

Source: TradeArabia News


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