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Rents to Slide in Abu Dhabi; Decline Continues in Dubai

ABU DHABI — Apartment rents are likely to ease further in the coming months in Abu Dhabi, while the declining trend in Dubai is continuing, enhancing the leasing choices available for residential and office spaces, according to the study report for the third-quarter prepared by real estate services 
firm Asteco.

Market dynamics will certainly persuade the landlords to be flexible in pricing in Abu Dhabi, as there is a continued hike in the housing supply. Also, prospective tenants are comparing the lower prices levels in Dubai and are increasingly showing an inclination to 
relocate to Dubai.

Abu Dhabi continues to see an increase in the supply of residential property with almost 1,000 new apartments delivered to the market in the last quarter, predominantly in off-island locations, including Mussafah, Mohammed bin Zayed City and Khalifa Cit, the study report says.

Research conducted by Asteco also found that around 400 apartments will come online this month on Abu Dhabi Island, in addition to a continued supply of apartments coming up in Khalifa City A.

Many of the apartments which have come online in the recent months were being leased out only slowly in the beginning, due to a mismatch between landlords’ rental expectations and those of prospective tenants.

“This is only natural, discounting will be more prevalent when the market is faced with increased supply, including the ‘Dubai and Drive’ option where the differential in rental prices is still hard 
to ignore.”

“As better quality units are delivered in Abu Dhabi over the next six to 12 months, including Marina Square and Sun and Sky Towers, many daily commuters will consider these developments. It is clear, however, that this significant group of prospective tenants will benchmark these developments against comparable properties in Dubai — particularly in Dubai Marina,” said Asteco Chief Executive Officer Elaine Jones in the report released here 
on Tuesday.

“But many prospective tenants have to give notice to existing landlords, either husband or wife may still have a job in Dubai and of course there’s the schooling issue. So market demand dynamics will not necessarily settle down until next summer,” Jones said.

Dubai Scenario

The report also says that lease rates in Dubai were declining as more new buildings become available.

Now parameters like the availability of transportation are significantly influencing the choice of the companies in locating their business, rather than price levels in future.

“The decline in the real estate market is helping to re-position Dubai once again as an attractive business location giving companies the ability to shop around for the best value for money,” said the Asteco chief executive. “Offices which can offer substantial amenities for staff will be the first to benefit,” she added.

But evidence from many international markets consistently reveals that land and property values and ultimately rentals, within the vicinity of stations linked to new metro lines increase significantly — 57 per cent in the case of the Tokyo-Kobe line in Japan. However, what is interesting is that the increases does not occur usually until the stations physically open, not when the line is announced or 
under construction.

So, office developments like Ibn Battuta Gate — located in close proximity to a Metro station as well as shopping malls and ample parking — will increasingly become the preferred option, after the Ibn Battuta Metro station becomes operational by February 2010. — ramavarman@khaleejtimes.ae