City report: Abu Dhabi
Abu Dhabi is encouraging potential investors to move back into market
Abu Dhabi often fails to attract the same level of attention as Dubai but in many ways business optimism in the UAE capital is experiencing a similar renaissance as its neighbouring emirate.
With the annual real estate event Cityscape taking place this week at Abu Dhabi National Exhibition Centre (ADNEC), the expectation is for a wave of new project announcements. It’s not hard to see why when you consider that Abu Dhabi’s GDP grew by around 4.8% last year to $259bn (AED953bn).
Will Neil, Abu Dhabi head of property consultancy Cluttons, says that the firm has recently started to field more enquiries from potential investors.
“We have been brought in to pitch for a lot of feasibility study work from some of the big developers and real estate businesses. I think they’re all gearing up again now that they see the economy is stronger. It’s just a case now of waiting to see what’s going to come forward.”
Overseeing the masterplanned development of the Emirate is the Abu Dhabi Urban Planning Council (UPC) through its Plan Capital 2030 framework. Capital 2030 covers the area of Abu Dhabi Island and the surrounding mainland (Abu Dhabi Region) and was the result of a large analysis and research process, to understand the area. Since its creation, masterplans for the Corniche, Capital District, Shahama and Bahia, Baniyas South Wathba and North Wathba and others have been released.
The original plan was launched in 2007 but is now in the final stages of being updated, says Amer Al Hammadi, the UPC’s executive director, planning and infrastructure.
“It will be presented to the leadership very shortly and is anticipated to be launched in May 2014,” says Al Hammadi.
The updated plan has been drafted to take into account the changing economic climate and anticipated population growth, among other factors. The current population for Abu Dhabi (island and mainland) stands at approximately 1,495,000 and is expected to grow to 2,471,000 by 2030.
The framework will focus on Complete Sustainable Communities (CSC) to ensure that neighbourhoods have the facilities to meet daily needs, such as schools, mosques, and retail.
“This suite of policies, regulations and manuals did not exist back in 2007, but it can now be incorporated into the Plan Update, which will benefit greatly from this rounded approach to community planning,” says Al Hammadi.
Ultimately, the update is less focused on expanding the city and more about using smart growth practices to make the most efficient use of land where development has started, or to revitalise existing areas to ensure they meet the needs of residents.
“Obviously, the creation of new developments will occur, but these will be carefully managed. Restrictions will be placed on unsustainable sprawl by amending the existing urban growth boundary (the boundary within which the majority of development will occur) to avoid increased infrastructure, community facility and environmental costs, and the creation of isolated communities," says Al Hammadi.
“An Implementation Plan and Capital Investment Plan will be key to ensuring the principles of the plan and the corresponding policies and framework plans are delivered on the ground over the coming years.”
Neil says that Abu Dhabi is starting to shift from a place that people visited on a day trip from Dubai, to a destination in its own right, and this can be seen in the number of tourism and cultural projects now taking shape.
The majority of this work is being spearheaded by Abu Dhabi’s Tourism Development and Investment Company (TDIC), which is building a number of projects on Saadiyat Island. These include the Louvre Abu Dhabi by 2015, Zayed National Museum by 2016 and Guggenheim Abu Dhabi by 2017. Earlier this month, TDIC said that the dome of the $653mn Louvre Abu Dhabi, which is being constructed through a joint venture between Arabtec, Constructora San Jose and Oger Abu Dhabi, would be ready in September.
According to property advisor CBRE, Abu Dhabi is now targeting 3.1mn guests in 2014, which equates to roughly an 11% annual increase. In addition, total guest numbers in 2013 reached 2.8mn for the first time.
“Developments such as Saadiyat Island are not only going to be a boon to the tourism market as they continue to expand, but we are also seeing that they are fuelling demand in the residential market as these are areas where foreigners can buy,” says Neil.
“There’s a lot of development on Saadiyat Island – probably higher end than Raha Beach and Al Reem. There’s a certain amount you can lease there in apartments and also buy big villa complexes.”
Last year, residential rents rose by 20% year-on-year, another sign of the recovery in the Emirate. Part of this has been attributed to the removal of the 5% rent cap last year and also the federal mandate for government employees to live in Abu Dhabi.
However, there has been a slight slowing down in price rises during the first quarter of this year, with an average rise of close to 10%. Housing units in off-island locations experienced higher rent growth of 14% during the period, according to CBRE, which says this is fuelling demand for more affordable housing.
Mat Green, head of research & consultancy, CBRE Middle East, says: “Off-island locations such as Khalifa City A and Mohammed Bin Zayed City are becoming popular choices for the more budget- focused tenants.
“Units within master-planned developments in mainland locations, including Al Reef Downtown, Al Ghadeer and Hydra Village, are now commanding rentals that are significantly higher than similar non-community based properties.”
At the same time, Abu Dhabi Council for Economic Development (ADCED) is, according to speculation, in the process of creating a rental index. The hope is that it will provide the current market rent for different categories of properties in a variety of locations.
“We haven’t heard any more announcements on that but I think it’s going to be seen as a positive step,” says Neil. “It will help to protect both landlords and tenants, providing the index moves in line with the market.”
At Reem Island, CH2MHill is conducting a Transportation Master Plan (TMP) for the entire 650-hectare development for Bunya Enterprises. The work has been ongoing since 2008.
The TMP addresses the access requirement for the entire island by alternative modes of transport. The island is also close to the Abu Dhabi Central Business District and Al Maryah Island, which is set to become the new financial hub for the city.
Richard Bryant, CH2M Hill’s MENA region business development lead for facilities & urban environments, says it has also progressed roads and bridges infrastructure design for sector 2 and for power and electrical demand.
Meanwhile, at Yas Island, developer Aldar said this month that anchor tenants have accelerated fit-out of their units at Yas Mall in preparation for the opening in November.
Thom Bohlen, chief technical officer at green buildings body Middle East Centre for Sustainable Development (MECSD), says it has around 25 live projects in Abu Dhabi.
Its biggest is the construction of the new Abu Dhabi National Oil Company (ADNOC) headquarters, which is set to complete early next year.
The tower is being built by Six Construct and the underground car parking by Arabtec. MECSD has separate contracts with each firm as a LEED consultant. Bohlen says the shell and core was finished a few months ago, and the fit-out of the building and final stages of the car park are now on the critical path.
“There’s been a lot of work going on at the islands and it’s likely to (continue) for quite some time,” he says. “We’re definitely getting more Estidama projects, because it’s required on every new project now.”
Elsewhere, local contractor Al Fara’a General Contracting, says the AED105mn ($28.5mn) Chinese kindergarten school it is building for Abu Dhabi General Services Company, Musanada, on the corner of 11th and 24th Street, is now 30% complete. General manager Colin Timmons told CW that the concrete superstructure is already finished and it is now doing internal and external finishes, mechanical and electrical installations. Final handover is scheduled for October.
Project management firm Faithful+Gould says it sees opportunities in its core business of infrastructure, hospitality and retail. Steven Batchelor, operations head for Abu Dhabi, says it is working on the Saadiyat Rotana Hotel, where its scope is pre- and post-contract cost consultancy services for client Al Diya Hospitality. Batchelor says around 5% of the project is completed and the handover date is Q4 2016. It has also won pre-contract cost consultancy services for Sowwah Central Mall, set to start next year.
Elsewhere, big ticket transportation projects such as the $2.9bn Abu Dhabi Midfield Terminal and the $10.8bn Etihad Rail are both on schedule for 2017 finishes. Moreover, construction work on the Abu Dhabi Metro LRT/Tram is expected to begin in 2015. The Emirate’s LRT and metro are currently in the final stages of preliminary design, according to the Department of Transport (DoT).
Upon approval of the Abu Dhabi Executive Council, the first phase of the metro project will be a 20km line that will link Zayed Port in the north-west of Abu Dhabi City to Zayed Sports City in the south east.
The bidding process for this initial phase of the metro and LRT is scheduled to begin in mid-2014, with these two projects set to be completed by 2020/21. An initiative to extend this initial phase of the metro to reach the airport – via Zayed City and Masdar City – is now being proposed, based on the need to serve the growing number of airline passengers and the airport’s workforce.