On hold projects get the green light in Abu Dhabi
A number of major commercial property projects in Abu Dhabi which were put on hold in 2011are now going ahead, it has been announced by the emirate’s executive council.
They include a new terminal in Abu Dhabi International Airport to open in 2016, the Louvre and Guggenheim museums on Saadiyat Island and prime Grade A office space released, raising the bar for commercial space in the city.
Cluttons, the real estate specialist that has enjoyed a dedicated Middle Eastern presence since 1976, said this promises a positive outlook for 2012 as major developers like Aldar and Sorouh post improved profits for 2011.
It says in its quarter one report that there has been a shift in the way residential landlords do business, as proactive landlords have started approaching brokers to let their residential properties. It said developers are also retaining brokers and paying agents commissions as an incentive to lease their properties.
Residential sales have seen a drop across the board, and rents have continued to fall slightly. However, prime apartments are continuing to let well. Abu Dhabi Island has been attracting strong interest as it became more affordable. Apartments on the St Regis development on Saadiyat Island are also proving popular. The short supply of retail facilities at many of the new residential developments is slowly being addressed at some developments such as Marina Square, but is still an issue for many projects.
Several high quality key commercial projects came online in the last half of 2011 including Etihad Tower, Sowwah Square, Capital Gate and Aldar headquarters. ‘The office sector received a boost from the municipality’s announcement that it would no longer issue permits for residential villas to be used for commercial purposes. This forced many companies to move to purpose built commercial space, with Prime Grade A office space proving the most popular, in particular Sowwah Square which has been successful at attracting both new tenants and those relocating,’ the report says.
Very few landlords are seeking to achieve rents above AED 2,000 per square meters per annum in 2012. New build quality stock is coming to the market at AED 1,400 to 1,600 per square meters per annum.
‘A further fall in commercial rents across most submarkets throughout 2012 is likely, with the exception of Prime Grade A space, bringing rents down to more realistic levels. Greater flexibility and incentives will be important and rents should stabilise by the end of 2012,’ it adds.
Cluttons anticipates that 2012 will prove challenging for the Abu Dhabi residential market as more stock comes onto the market, including the Al Rayanna project which will release 1,800 apartments this year and the Al Reef Downtown which will release 1500 apartments. Apartment rental values have dropped between 6% and 10% on some projects and will continue to soften throughout 2012.
‘However, demand for residential property still remains strong and the recent announcements by the government to resume landmark projects, and major companies posting significant profits has had a positive effect on expectation in general and should continue to reenergise the economy throughout the year,’ it adds.