Time's ripe to negotiate your rent lower in Abu Dhabi

The low oil price continues to weigh heavily on Abu Dhabi's property market, as the government continues to cut spending, at a time when a significant amount of new supply is ready to be delivered.

A combination of reduced public spending, business contraction, a reduction in staff benefits and the continued delivery of new housing units have placed downward pressure on rents and sales prices across Abu Dhabi's real estate sectors, according to real estate consultancy Asteco.

Nonetheless, existing and off-plan developments with unique selling points in desirable locations such as Saadiyat Island have bucked the trend and recorded healthy demand.

Similarly, rents within this master community have proven more resilient due to the limited supply and general appeal of the area.

Asteco research identified a three per cent quarter-on-quarter (q-on-q) decline in apartment rents in Q1 this year. Over the last 12 months, the market recorded a drop of eight per cent in rates.

"In part, this was a consequence of tenants negotiating favourable leasing conditions, as budgets were reined in, due to economic uncertainty and overall employment prospects," said John Stevens, managing director, Asteco.

Villa rents put up a slightly better performance with declines limited to five per cent over the last 12 months and a marginal two per cent for the first quarter.

However, villas in some communities, such as Al Raha Gardens, and lower-end units on Abu Dhabi Island, recorded decreases of up to 12 per cent.

"The low oil price continues to weigh heavily on the capital's property market, as the government continues to cut spending, at a time when a significant amount of new supply is ready to be delivered. This quarter has underscored the existing trend that 2017 will be challenging," added Stevens.

"We expect to see further corrections, but with a marked increase in demand for good quality and competitively priced products as the appetite for older stock fades. Indeed, we've already witnessed off-plan, well-priced villas with flexible payment plans generating interest from potential investors."

Apartment sales prices decreased by two per cent q-on-q and four per cent since Q1 2016. Al Muneera, Sun & Sky Towers, The Gate and Saadiyat Beach Residences all experienced declines of Dh200 per ft2 to Dh1,350 per ft2, Dh1,300 per ft2, Dh1,250 per ft2 and Dh1,400 per ft2, respectively.

Villa sales prices witnessed a quarter-on-quarter decline of two per cent, while annually the figures decreased by five per cent. Raha Gardens had a quarterly drop of two per cent, with a two-bedroom villa averaging Dh2.6 million. Al Reef prices softened by three per cent, a two-bedroom villa sold for Dh1.85 million and Saadiyat Beach Villas, where prices dropped by just one per cent, were available for Dh5.75 million for a two-bedroom.

Around 2,700 new apartments were delivered over the last 15 months, with many leased and sold below prevailing rates to facilitate a higher take-up.

In Q1, 1,350 new apartments and 150 new villas were completed across Abu Dhabi. By the end of 2017, it is expected developers will have delivered another 2,550 new apartments and 900 new villas.

Office market
In the commercial sector, rents fell 10 per cent compared with Q1 2016 and two per cent over the quarter.

In Q1 2017, rents in older Grade B buildings ranged from Dh650 to Dh930 per m2 per annum, while fitted space in new prime buildings achieved Dh1,800 per m2 per annum on average.

By year end, it is expected that 180,000 sqm of new office space will be delivered across several high-profile office towers, including the ADIB Headquarters building on Airport Road, as well as Leaf Tower and Omega Tower, both on Reem Island.

The office sales market remained restricted by the limited number of units available for sale.

Stevens added: "We can attribute the decline in the office market to limited new take-up and virtually no tenants upgrading to larger units or better locations. Tenants are generally looking for smaller units with parking, which resulted in owners of larger office areas to sub-divide space to meet the demand for affordable offices for SMEs."

- business@khaleejtimes.com