Rents on the rise in Abu Dhabi according to report
Residential sector leading market recovery
The average rent of a prime two-bedroom apartment in Abu Dhabi increased by 17% during 2013 to AED140,000 ($38,000).
And sales prices for prime residential units witnessed a 25% hike in the last 12 months.
The figures were revealed by Jones Lang LaSalle in the company's fourth quarter (Q4) 2013 Abu Dhabi Market Overview report, which also covered the office, retail and hospitality market sectors.
David Dudley, regional director and head of the Abu Dhabi office at Jones Lang LaSalle, Middle East & North Africa, said: “The residential sector is leading Abu Dhabi’s market recovery. Prime residential sales prices increased on average by 6% during Q4 2013, resulting in annual growth of 25% during 2013 – driven by improved investor sentiment and expectations of further price and rental growth.
“The prime residential rental market increased on average by 8% during Q4 2013, resulting in annual growth of 17% during 2013 – in part driven by new job growth, reduced commuting from Dubai and removal of the 5% annual rent cap.
"Retail, hospitality and office sectors have remained stable and are poised for recovery as supply and demand become more balanced. This continued stability remains selective in terms of quality of location, design and management – leading to product differentiation and two-tier performance between high grade and low grade property.”
There were a number of major completions in the office market in Q4, including Capital Tower at Capital Centre, the World Trade Centre building on Hamdan Street and the Landmark Tower on the Corniche. In spite of 140,000m2 of new office supply, vacancy rate increased from 38% to 39% reflecting improved market absorption of new supply.
Residential stock increased by around 4,400 units in Q4, bringing the total stock in locations monitored by Jones Lang LaSalle to around 218,000 units. Additions to supply included units at Saadiyat Beach and Al Reef.
Retail stock increased by approximately 67,000m2 of GLA in Q4 with the delivery of the World Trade Centre Mall on Hamdan Street and the Eastern Mangroves Promenade retail complex. Average line store retail rents remained unchanged this quarter at AED 2,887/m2 per annum for malls on Abu Dhabi Island and at 1,990/m2 per annum for malls outside Abu Dhabi.
The report also revealed that, while the hotel sector continues to witness new completions, the market is approaching recovery, with occupancies increasing to 67% (during the first 11 months of 2013) and RevPAR up by 7% compared to YT November 2012. Occupancies are at their highest level since 2008 and while ADR’s have continued to be under pressure over the past year, 2014 is expected to register an increase in average performance as demand increases and the level of new supply moderates.
Dudley concluded: “The short to medium term market outlook remains positive, driven primarily by major government-backed construction and infrastructure projects such as the airport expansion, transport improvements and leisure attractions. However, a long term sustainable market recovery remains dependent on further government initiatives to diversify the economy and generate new long-term sustainable employment growth.
"A sustainable recovery, is also dependent on the government continuing to implement further supply controls to ensure a balanced real estate market going forward. The Abu Dhabi market looks positive in the medium term, but there will be selective strong performers specific to sectors, locations, user requirements, property management and overall infrastructure.”