Abu Dhabi's property market will struggle in 2013
Prices and rents will continue to weaken across all sectors, says JLL
Abu Dhabi's property market "remains 18-24 months behind Dubai and is not expected to to experience an upturn in 2013", according to Jones Lang LaSalle's MENA region CEO Alan Robertson.
According to the firm's latest report on the market, the property sector in Abu Dhabi remains "heavily reliant on the Government investing revenue surpluses" in infrastructure and economic development projects in order to stimulate private sector jobs growth and demand for property.
Abu Dhabi's Executive Council last week announced plans to invest $90bn on capital and infrastructure projects with a view to reducing long-term reliance on oil & gas, with much of the money pledged towards building social infrastructure such as healthcare, education and housing facilities.
In the short-term, however, the prospects for all sectors of property - office, residential, retail and hotels - look set to weaken in 2013 as more projects complete - thereby increasing demand in a sector where supply is already weak.
In 2012, 340,500m2 of office space was added to the emirate's market, bringing the total to 2.87m m2.
Jones Lang LaSalle's head of research for the MENA region, Craig Plumb, added that in 2013 there is "a lot of supply still to come onto the market, and we're not seeing the same strength of demand from the private sector as we have in Dubai".
A number of major office schemes are set to complete in 2013, including the World Trade Centre Tower at Central Market, ADIC's new Al Bahr Towers HQ and the new Capital Tower at Capital Centre.
"There is still strong government demand in Abu Dhabi, but that only has a limited impact on the private market as a lot of those governments bodies tend to go in their own buildings. Therefore, we believe the market will continue to move in tenants favour and there will be more choice of Grade A buildings available in Abu Dhabi in 2013," said Plumb.
The picture is similar in the residential market, despite moves by the government to attempt to underpin it by insisting that its employees must live within the emirate to qualify for housing allowances. Average rents for a two-bedroom apartment in Abu Dhabi have dropped by 48% since 2008 and are expected to continue falling. Average sale prices have dropped 53% to $2,777 (AED: 10,200) per m2.
Some 16,000 new units are expected to complete in 2013, compared with 12,00 last year. Plumb argued that some developers who are not as able to sell units off-plan as quickly may end up holding onto properties and renting them out.
Meanwhile, the hotels market in the emirate is also set to weaken even further. Current room rates in the emirate stand at an average of $150 per year (compared with $230 in Dubai) and occupancy rates at 60% (Dubai: 77%).
A further 2,500 rooms are expected to be added to Abu Dhabi's hotels stock in 2013. Although this is a smaller number in absolute terms than Dubai, which is expected to add 5,000 rooms in 2013, it is a greater increase in terms of percentage of overall stock - 15%, compared with 10% in Dubai.
Plumb said that although the leisure offer is improving in Abu Dhabi through additions such as Yas Waterworld and the progression of the Abu Dhabi Louvre project, this is a longer-term initiative which will take time to deliver results.