Towering growth to transform Abu Dhabi's skyline


The capital's skyline is undergoing a transformation as, for the first time, highrise buildings are starting to soar high above the city streets.

Until now, Abu Dhabi had been maintaining a low profile compared with other modern cities, but all that is changing as dozens of under-construction towers – some as high as 85 storeys – take shape.

The massive Al Reem Island project alone will have 19 highrise residential buildings, and many more are to be built along the Corniche all the way from Port Zayed to the Emirates Palace hotel.

Other major projects in the city include Dana Abu Dhabi and Al Rawoda, while high-rises are set to be built in many other areas, including Al Khaladiya, Al Bateen, Al Nahyan Camp, Al Najda and Airport Road.

These projects have turned Abu Dhabi into a giant workshop, especially as the projects have coincided with huge infrastructure works such as the tunnel project, the Salam project, the widening of major roads and improvements to the sewerage system.

All these massive developments have created bottlenecks in many streets, though the congestion is expected to ease by the end of this year as some projects are completed.

The situation is similar in suburbs such as Al Raha Beach, Al Reef, Khalifa City, Mohammed bin Zayed City, Shahama and Yas Island, where tens of thousands of labourers are working on residential projects for Al Dar, Sorouh, Al Qudra, Manazil, Hydra, Bani Yas and other UAE developers.

Many of the projects include commercial elements and, in addition to the residential towers, thousands of villas are under construction.

Real estate experts told Emirates Business that up to 35,000 residential units are about to start appearing on the market, and this could cause the current high rents to decline by 20 per cent or more by the end of the year.

However, other sources said hopes of very low rents are unrealistic as some construction delays are likely, which would limit the supply of new units, and certain levels of rental returns are required to cover the building costs. And they said the prospect of a steep decline in rents is being talked up by some real estate agents in a bid to lure back thousands of former residents who moved to Dubai when rents in the capital became unaffordable. Rents started to rise in May 2005 and have since soared by as much as 350 per cent to the previously unimaginable levels, according to studies.

Many families have had to rent older, low-quality units for inflated prices. For example, the price of an older two-bedroom apartment soared from Dh32,000 to more than Dh160,000. Three-bedroom units went up from Dh75,000 per year to Dh280,000.

Others moved to suburbs such as Mussaffah, Rahba and Shahama where rents exceeded Dh120,000 for a two-bed unit.

Many residents took advantage of rent cuts in Dubai and moved to areas such as Discovery Gardens, which offered a relatively short commute to Abu Dhabi.

Some sources said such ex-residents would welcome a chance to move back to the capital if rents fell so they could avoid traffic jams on the Dubai-Abu Dhabi highway.

Real estate agents say prices have already begun to fall and they have units in the capital available for two to five per cent less than the rates that were being charged at the end of last year. Residential rents outside Abu Dhabi have fallen by as much as 10 per cent, while office rents inside the city have declined by 30 per cent.

Rents for newly completed villas at Al Bateen and Muroor and Khalifa City have fallen by five per cent, and this has led to an influx of expatriates into these areas.

Property agents believe the decline in prices will continue at the same level – or even increase – between now and summer. However, they do not expect a repeat of the pattern seen last year when predictions in February that rents would fall in the spring proved ill-founded as increases were reported in April.

Still simmering

Mas'ood Al Awar, CEO of Tasweeq Real Estate Development and Marketing, said the overheated rental market had started to calm down and the intermittent increases seen last year would not be repeated.

"Without any doubt, there will be a shake-up in the market and everyone will feel it," he added. "Rents in Abu Dhabi will enter a stable phase, with prices still on fire but with fewer flames."

He said those who were predicting declines as high as 50 per cent were mistaken as such falls were impossible. "Even if there is a decline, it won't be a real decline as such. Units that used to be rented out for Dh50,000 are now fetching four times as much and even if the cost went back to Dh100,000, the rent would still have doubled from the original price."

He said the majority of studies of the Abu Dhabi market predict that 22,000 to 32,000 units would be delivered between now and the end of 2011. However, even this number is relatively small in the face of the massive demand that is increasing every day and could absorb twice as many homes as are likely to be offered.

"If we assume that all the residential units that are due to be handed out are all rented out, then rents will decline only slightly by 15 to 20 per cent by the end of next year. And some projects might be delayed for reasons outside the control of the real estate and development companies."

Al Awar does not believe that a large number of people who work in Abu Dhabi and live in Dubai will return to the capital as, he says, there will not be a sharp decline in rents. "Residents wishing to return will not find residential units in Abu Dhabi available for the same rents being charged in Dubai's Discovery Gardens or Media City, where prices have declined by 40 per cent. There will be residential units with more affordable rents in areas such as Mussaffah and Mohammed bin Zayed City, but most people will not find living conditions in these areas acceptable.

"Families are sharing villas that have been sectioned off into smaller residential units. As for living in the new towers going up in Abu Dhabi, these projects won't be viable if rents are low in the coming years and many owners will resist rent cuts."

Correction stage

Al Awar said the market was about to enter a correction stage rather see a collapse in rents. "The Abu Dhabi economy is moving along quite strongly with tens of thousands of new jobs being created by its projects in the petrochemical, nuclear power, sustainable energy and infrastructure sectors. There are also new tunnel, train, airport development and tourism projects including hotels and museums. The capital will see an influx of talented professionals and semi-skilled staff, and such huge projects need residential buildings for their employees located close to their place of work to guarantee that they remain in the emirate. Abu Dhabi is increasing its economic activity day by day."

He said the Abu Dhabi economy had proved immune to the effects of the global financial crisis because of its financial strength, and the emirate was able to offer salaries that were among the highest in the world.

"It has became an attractive base for international skilled and semi-skilled employees, despite the high living costs that have made it one of the most expensive cities in the world. But what is strange is that despite the complaints about the expense of living in Abu Dhabi, we do not see an exodus from the city – in fact, the opposite is true. Newcomers are arriving in the city and its suburbs steadily."

Wahid Attalah, CEO of Spectrum Consultants, agreed that there will not be a dramatic decline in rents this year and said that instead the capital could see a modest decline.

He said: "The real decline will be in 2011 when the number of new units handed over will reach 30,000, though even that figure will not meet the demand, which currently ranges between 80,000 and 100,000. But it is possible that rents will decline by 20 to 30 per cent in certain areas – but not in all areas.

"New demand will absorb what is offered. Abu Dhabi is building many grand projects and has surprised the world with schemes such as the nuclear power project and large-scale infrastructure project which will change the map in the coming years. And no one knows when Abu Dhabi will announce more such projects.

"There is a consensus that Abu Dhabi will come up with new projects but we do not know what the nature of these projects will be. But such projects will definitely need new skilled and semi-skilled workers, which will increase the demand for residential units. Abu Dhabi has strong infrastructure that is unprecedented in the Gulf and this has made it attractive to the thousands of expats who live there. And its attractiveness will increase over time."


Adel Zarouni, Managing Director of Burooj Properties, questioned the claims that 30,000 residential units would appear on the Abu Dhabi market soon, saying: "Where will they come from – will they fall on Abu Dhabi by parachute?

"We have contradictory statistics – some say the additional supply this year will be 35,000 units and others say 50,000. But if the experts counted the new units they would find the figure is much less. Most likely, the total number of units in all the new projects inside and outside the city that will be handed over this year and the next will not exceed 18,000. There are many delayed projects that may not be handed over until after 2011. And some projects that will be handed over this year were due to be finished last year and are still not finished. Therefore, delays are to be expected."

Zarouni believes rents in the capital will decline by at least 10 per cent this year and in 2011 – but not just as a result of an increasing supply of units. He identifies three factors that will push prices down, of which the new supply of units in projects such as Al Reem Island is only one.

"The second is the relocation of thousands of former Abu Dhabi residents to Dubai, and the pace of this could increase throughout the current year. This will cause a slight decline in rents in the suburbs that are closest to Dubai, such as Shahama and Rahba.

"The third factor is the signs of a recovery by the global and local economies, which will cause the wheel to gradually spin again."


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