Abu Dhabi housing rents and values will stabilise, says Cluttons head

Will Neil discusses the outlook for the property industry and reveals the best investment he was ever involved in.

William Neill is the Cluttons Abu Dhabi head. He has lived in the UAE for three years. Lee Hoagland / The National

Name: Will Neill

Position: Head of Cluttons

Based: Abu Dhabi

Years in industry: 11

What is the asset class and geography you are focused on?

I currently oversee all of the service lines within Cluttons Abu Dhabi. Cluttons is much more than just a residential sales and leasing business. We offer a large range of real estate services including both commercial and residential property valuations, property management and development consultancy. In addition, through our commercial agency, we act on behalf of both landlords and corporate tenants. My specific experience is within commercial leasing and I had previously headed Cluttons’ commercial agency department in Dubai before moving down to head the Abu Dhabi business.

What is the outlook for the month ahead in your opinion?

I expect that we will continue to see residential rents and values stabilise, which is a trend that we started to see emerge earlier this year. The volume of residential sales taking place has slowed as values have risen to a level where investment yields are not quite as attractive, plus there is a limited amount of new stock coming onto the market. There is also the issue of the sustainability of the strong growth we have seen over the past 18 months.

In the rental market, supply and demand are well matched, which to a large extent is helping to keep rents stable. With the robust economic growth and subsequent rise in the number of jobs being created, demand for residential will no doubt continue to rise and we expect that this will translate into a number of new schemes being announced over the next few months.

With regards to the commercial property market, the biggest announcement for next month will be the delivery of the much awaited Yas Mall which is expected to help in delivering Abu Dhabi’s first true retail destination, which will be a landmark moment for the capital’s retail sector.

What are the main risks (either upside or downside) to the outlook?

The main risk at present is ensuring that residential demand does not suddenly outweigh supply. There has been a healthy level of new job starters relocating to the emirate to work in the energy/hydrocarbon, tourism, hospitality, and education sectors over the past 18 months, which have helped to boost the overall real estate market. The removal of the rent cap has allowed landlords to increase rents on properties that were locked into a historically low rent. Without the rent cap, if demand begins to outweigh supply, there is a danger that rents could suddenly inflate if demand increases, pushing the general cost of living up.

The municipality have announced a rental index will be put in place which will be a guide to what the market rent will be at lease renewal. It is important that this is put in place as soon as possible because at present there is nothing to protect the market from sudden price hikes.

What is the best investment at the moment in your opinion?

At present, the best investments in market in terms of capital growth and performance tend to be industrial and logistics assets. With the growth of Kizad, Etihad Rail and DWC in Dubai as well as Expo 2020, there has been good demand from industrial occupiers and developers. With the emergence of key logistics hubs around the country, the focus of further investments will inevitably be around these mega transport and logistics nodes.

Often it is difficult for occupiers to find buildings which suit their needs and are of the right specification. Cluttons has been involved in a number of deals where investors have financed and developed ‘build to suit’ options for corporate occupiers who have taken leases in excess of 10 years.

‘Sale and leaseback’ investments are also very popular at present. The basic principle is where an owner-occupier sells the site to an investor, but then continues to lease it back as a tenant from the buyer/investor for an agreed term.

What was the best investment you were ever involved in?

The best investment I have ever been involved in was the acquisition of a large industrial estate in the UK on behalf of one of the leading industrial funds/landlords consisting of approximately 50 warehouses which were leased out to a range of occupiers on attractive lease terms to the landlord. Not only did we achieve a good market price for our client but we secured a position as exclusive leasing agent for the scheme as a result of the deal.

What was the worst?

The same deal! Sadly this happened just prior to the global economic downturn in 2007 so the deal didn’t seem quite so attractive to our client 12 months later.

Follow The National's Business section on Twitter