Abu Dhabi saw sales and rental prices soften for the fourth consecutive year, however, the pace slowed down in 2019.
Office Market
- The upper rental range across office grades is witnessing contractions while the lower headline rental range is holding relatively steady.
- With landlords pushed to offer better terms in what is now a predominantly tenant-friendly market, rent-free periods, multiple check payments and contributions to fit-outs are becoming increasingly common.
- Occupancy levels have remained relatively stable, particularly in Grade A stock while new stock has also been limited. *Most of the office spatial requirements are for smaller plug-and-play options as major demand continues to stem from downsizing activity.
- The oil and gas sector continues to account for the most number of enquiries.
- Al Maryah Island is outperforming the rest of the office market with AGDM witnessing steady demand from government and private entities.
- Abu Dhabi’s GDP growth rate over the course of 2019 and 2020 is expected to strengthen with GDP forecast to grow by 3.9% and 4.9% respectively.
Industrial Market
- Abu Dhabi’s industrial sector continues to see softening in rents, averaging over 8% drop year on year. With the closing of MENA port, we have seen occupiers migrating to Mussafa, ICAD and KIZAD, creating an increase in industrial take-up in these districts.
- Occupier sweet spot continues to be for properties that offer flexible space, preferably warehouses with an option to have serviced offices (15-25 Sqm), enabling occupiers to test the market conditions and expand as they scale up in operations.
Retail Market
- Abu Dhabi’s retail market continues to be the most challenging asset class.
- While prime and superregional malls are displaying relative resilience, older stock remains under pressure to keep up with footfalls, consumer engagement and in turn occupancies.
- We are increasingly seeing developers coming forward with flexible lease terms, revenue share models and fit-out contributions to enhance product mix and maintain occupancy – notably a common practice in most western retail markets.
- To sustain the current retail market, mall operators/ asset managers of these older, weaker-performing malls need to deploy proactive marketing strategies, and digital and social media engagements and take a hard look at optimising tenant mix while serving their catchment area better.
Residential Market
- Prominent completions over 2019 include Parkside Residence in Reem Island, Park View, Al Noon Saadiyat and Soho Square in Saadiyat Island and part of West Yas Villas bringing nearly 3,000 units to market.
- Currently the total Abu Dhabi residential stock is at 264,000 units.
- An additional 1,000 units are scheduled to be handed over by the end of 2019, however, some of these deliveries may be pushed to early next year.
- Looking ahead to 2020, we expect over 5,000 units to be delivered. Major deliveries include the Bridges by Aldar, Fairmont Marina Resort and Residences in The Marina and the Marina Rise Tower in Reem Island.
- Sales prices continued to weaken across most apartment and villa communities, 8% on average across the city over the past 12 months.
- Most sales transactions are happening in the off-plan segment where attractive payment plans and newer products are to be found.
- Prices in various communities such as Al Raha Beach, Yas and Saadiyat Island appear to have displayed relative resilience with a lower level of drops, showing a preference for newer and quality build products.
- Most downsizing activity across the private and public sectors has been sustained over the last year.
- Villa districts displayed resilience compared to the last few year's performances while apartments have witnessed the same level of drops as that of 2018.
- Within the same communities, smaller units (studios and 1 bed) have typically outperformed when compared to larger units which have witnessed sharper falls.
