Commercial property markets in Dubai and Abu Dhabi continue to struggle
Knight Frank report reveals drop in office rents across both emirates
Abu Dhabi’s office market slowed over the course of Q2 and Q3 according to the latest market review from Knight Frank.
And an increase in supply, coupled with a slowdown in new market entrants is continuing to impact Dubai’s office market performance.
Abu Dhabi’s GDP grew by 1.5 per cent in the year to Q2 2018, with both the oil and non-oil GDP registering year-on-year growth.
Taimur Khan, research manager, Knight Frank, said: “Whilst there is increased activity from certain sectors in the market, there has been a notable slowdown in demand from the general trading and professional sectors.”
Prime office rents in Q3 2018 registered at AED1,720 on average (m2/pa), down 11.5 per cent from Q3 2017.
Over the same time period, Knight Frank also witnessed Grade A rents register the steepest declines with rents falling by 15.8 per cent.
However, Khan added: “Looking ahead, rental rate declines are expected to begin moderating in Abu Dhabi’s Prime and Grade A market on the back of lower levels of supply and increased demand from the hydrocarbon sector.”
The report reveals that existing occupiers in Dubai are being encouraged to take advantage of favourable market conditions.
The report revealed average office rents across Dubai softened by 5.8 per cent year-on-year to Q3 2018.
Prime office rents in Q3 2018 registered at AED246 (ft2/pa), down 4.9 per cent in the year Q3 2018. While Grade A rents fell 8.9 per cent over the same period and now stand at AED145 (ft2/pa) on average.
Vacancy in core prime assets remains as low as one per cent.
Khan added: “The short to medium term outlook for Dubai’s commercial market remains negative with rents expected to continue to decline across all market segments. This trend is likely to be primarily driven by the delivery of additional supply which we expect to total at over 400,000m2 by the end of 2019.
“However, the vast majority of this supply is concentrated in the Grade A and Citywide office market, as a result we expect that prime market rents are likely to be less impacted by the influx of new supply in the medium term.”