Abu Dhabi office market set to weather lower oil prices

Taylor Scott International News

Lower oil prices could lead to possible implications for the Abu Dhabi real estate market but commercial property should be able to shrug off such concerns, according to a new analysis. The region’s medium to long term prospects remain strong and there is a limited office supply pipeline which has led to vacancy rates dropping for Prime and Grade A offices in the to 26%. Overall the commercial sector saw a marginal slowdown in the number of enquiries in the second half of 2014, according to the latest Abu Dhabi office research report from international real estate firm Knight Frank. The fall may be due to companies reviewing the impact in falling oil prices and nearly 80% of enquiries were between 100 and 500 square meters, data in the report shows. The overall effect on market rents over 2014 was minimal, but the firm suggests there could be further improvements in headline rents, as little prime or Grade A supply enters the market. Take up during 2014 was still dominated by the oil and gas sector at 16% and government at 15%, which positively impacted the absorption of new accommodation in Abu Dhabi. The leisure and hospitality sector witnessed an increase in the number of enquires, which reflects the government’s efforts in diversifying the economy and growing this sector. Prime office rents edged up in Abu Dhabi in the second half of 2014 to AED1,800 per square meter whilst rental values for Grade A shell and core office space remained steady at AED 1,200 per square meter. Market sentiment through the diversification of the economy continues to improve with mega projects such as Khalifa Port, registering a growth rate of 24% from January to September 2014, compared to the corresponding period in 2013, the report points out. With the Midfield terminal due to be completed in July 2017, this will be expected to positively impact the economy further, in both trade and tourism and the Abu Dhabi Global Market (ADGM), the newly formed international financial centre in Abu Dhabi, announced that it has signed a 50 year lease for the Financial Building, Al Maryah Island which is owned by a Mubadala subsidiary. The report explains that ADGM will be responsible for establishing a legal jurisdiction, registering entities within the freezone and regulating all financial services activity on the island in line with international standards and under English Common Law. ‘The market dynamics continue to change in Abu Dhabi as the city expands further from the main island,’ said Matthew Dadd, head of Abu Dhabi commercial leasing at Knight Frank. ‘Regardless of economic trends, Abu Dhabi real estate continues to offer a good depth and breadth of opportunities for occupiers, although there is a limited pipeline of new office accommodation which will impact the market in the coming years,’ he added. Continue reading →

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