Office rents in Abu Dhabi fell 12 per cent in the second quarter compared to the first quarter of 2010, with fresh supplies ratcheting vacancy rates to eight per cent, Jones Lang LaSalle (JLL) said on Wednesday.
In the second quarter market review, released on Wednesday, the global real estate consultancy said that vacancies are likely to increase further as more supply enters market.
Year-on-year office rents fell 27 per cent with average Grade A rent standing at Dh2,200 per square metre compared to Dh3,800 per square metre in the fourth quarter of 2008. Grade B rentals dropped more rapidly with average rentals below Dh1,700 per square metre.
There was a clear emergence of a two-tier market with newly commenced standalone office buildings able to benefit from lower construction costs and offer lower rentals, the report said.
According to JLL, total office stock across the Abu Dhabi Metropolitan area is approximately two million square metre.
An additional 1.2 million square metre of office supply is expected to enter the market before the end of 2012, over 50 per cent of which will be within large-scale mixed use projects and tower buildings.
Despite many developers scaling back or delaying their proposed developments, especially the more ambitious projects, total office stock is expected to reach 3.6 million square metre by 2013-end.
"Rents in Grade A and B buildings are expected to fall further during the third quarter and the gap between Grade A and B rents is expected to widen. Decreased rentals will have a positive impact on demand,” the report said.
APARTMENT NUMBERS TO RISE
JLL estimates 15,000 units to be completed by the end of the year with majority of existing residential supply is low quality with a high proportion being shared villas.
The total current stock of 179,000 residential units is expected to reach 251,000 units by 2013-end. Apartments will comprise around 77 per cent of the total supply, with a significant decrease in the number of residential units within shared villas.
Sorouh Real Estate chief financial officer Richard Amos told Reuters on Tuesday that some 6,000 to 12,000 units are likely to be delivered this year by developers in Abu Dhabi.
"Rents peaked at unrealistic levels in 2008 and have subsequently declined, with apartment rentals facing a year-on-year decrease of 16 per cent. The 'Dubai effect' has been a significant factor, together with emerging over-supply in the upper segments of the market," the report added.
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