Economic growth driving Abu Dhabi commercial property market

The continued expansion of Abu Dhabi’s economy, led by the growing hydrocarbon sector, is translating into increased demand for space across the emirate’s commercial market, according to Cluttons.

Top tier rents in Abu Dhabi’s office market have held steady once more in the third quarter, with Grade A and super prime space continuing to command a high level of interest from a wide range of opportunistic occupiers, who view the current rates of Dh1,850 per square metre (psm) to Dh2,000 psm as “fair value”, the consultancy said in its ‘Winter 2014 Abu Dhabi Commercial Market Outlook’ report.

"Most Grade A schemes are operating at close to full occupancy. With the supply pipeline for new top tier schemes still relatively weak, occupiers have been left with no option but to look at other segments of the market.

“This strong demand is being transferred to the secondary and tertiary markets, pockets of which have recorded an upward creep in rents for the first time in 18 months," the report said.

“This strong demand for Grade A space is filtering through to other segments of the market, and this is driving the emergence of a two tiered secondary and tertiary market,” said Cluttons’ international research and business development manager, Faisal Durrani.

“We expect this trend to gather pace, with a widening gap in rents in these developing segments of the office market.”

During Q3, rents for secondary space increased by 8 per cent to Dh1,300 psm, while tertiary rents climbed to Dh900 psm, which translates into a 13 per cent increase on Q2.

“The emergence of this two tiered market has been caused by the presence of secondary and tertiary stock in prime areas of Abu Dhabi, such as Khalifa Street, Electra Street and Khalidiya Street, where Grade A space remains limited.

“The schemes recording this upward creep in rents include those which provide adequate parking provisions, offer reliable property management services, and are well maintained,” said Durrani.

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