Abu Dhabi-based mega-projects currently in the pipeline will see a steady increase in the supply of office space across the city.
Substantial growth within the Abu Dhabi office rental market in 2008 helped propel the rate of growth across the Middle East to a 9% average, according to a new report.
But though such figures would usually spur construction activity, the wider economic environment may offset such a spike, the firm behind the report told Construction Week.
“Abu Dhabi currently has a severe shortage of Grade A space,” the Office Space Across the World 2009 report, compiled by real estate firm Cushman and Wakefield, stated.
“As demand from both international and domestic occupiers held firm, rental levels have risen by a third over the year,” it said.
“Nevertheless, demand has started to focus on smaller floor-plates as occupiers look to scale down their operations.”
Speaking to Construction Week, Cushman and Wakefield research chief David Hutchings warned that despite the growth rate, current economic conditions may continue to hamper construction.
“If you take a market which has seen phenomenal growth, if the economic conditions remain the same then you will typically find a significant increase in developer and investor interest,” he said.
“But clearly in an environment where the current and prospective economic environment is weaker then people will not automatically react to the past growth.”
Office space in Abu Dhabi averaged US $973 per m2, up 33% on the previous year. Globally, only Kuala Lumpur and an area of Istanbul saw stronger annual growth.
The report also revealed that Dubai climbed up the rankings from 8th to 5th place, the biggest single jump of any of the cities in the top ten.
Office space in Dubai averaged US $1179 per m2 in 2008, up 7% on the previous year.
“The most notable rise in rents was seen in South Africa, where rents rose nationally by 21%, and in the UAE, where rents rose by 20% over the year,” the report said. “The latter was principally as a result of increased activity within the Abu Dhabi Emirate.”
The report added that Dubai was now firmly established as the most expensive destination in the region and among the front runners on the global stage.
But it also said that the Dubai market started to cool towards the end of 2008 with transaction volumes showing a decline.
Hong Kong rose to the top spot, pushing London down to third place, with Tokyo leapfrogging into second place.
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