Office rents in Abu Dhabi have fallen to their lowest point in more than eight years as low global oil prices continue to slow the capital’s economy.
According to property broker Asteco, average office rents in prime office buildings in the capital slumped by 4 per cent in the three months to the end of September to Dh1,600 per square metre as companies in the capital continued to feel the pinch from an economic slowdown caused by two years of declining oil prices.
Unlike housing rents in Abu Dhabi, office rents remained fairly static in the years following the global financial crisis as a glut of new space hit the market in areas such as Abu Dhabi Global Market Square on Al Maryah Island and around Abu Dhabi National Exhibition Centre.
The slump in prime office rents – often seen as a bellwether of a city’s economy – follows a similar dip in rents the previous quarter, brokers say, wiping out any rent increases made by landlords since the end of the global financial crisis.
Asteco said that office rents in the capital are now 72 per cent lower than they had been at their market peak in late 2008.
“Low oil prices leading to government budget reductions and job cuts have negatively affected overall market sentiment. Office rental rates were under pressure this quarter with indications that tenants are either downsizing or moving to more affordable premises,” said John Stevens, Asteco’s managing director. “The reduced demand led to an increase in vacancy rates, which will put further downward pressure on rental rates going forward.”
Housing rents in the capital also continued to decline, Asteco said, as landlords bore the brunt of job cuts in the oil and gas and construction industries with areas often popular with oil executives experiencing the largest falls.
Average apartment rents on the Corniche were down by 9 per cent compared with a year ago and fell by 3 per cent over the quarter, Asteco said. High-end apartments in Khalidiya were down by 8 per cent over the year and fell by 1 per cent during the quarter.
Villa rents were down, on average, by 2 per cent from the previous quarter. The highest drop was in Al Raha Gardens (6 per cent) followed by Al Raha Beach Villas (4 per cent).
Asteco said that rents in Abu Dhabi were now falling faster than those in Dubai, bringing the city’s rents more into line with those of Dubai.
At the start of this year, the difference in annual rent for one and two-bedroom apartments between the two emirates was typically Dh20,000 per annum. By the end of September this had narrowed to about Dh10,000 as average rents in Abu Dhabi fell by about Dh5,000 a year and those in Dubai were down by Dh1,000.
“The majority of vacant apartments, which were offered at reduced rates in Q2, have now been leased, especially the smaller unit types – studio, one and two-bedroom,” Mr Stevens said. “This indicates that there is demand in the market, but value for money is the most important factor. In comparison, rental rates for larger and more expensive three and four-bedroom duplexes and town houses have fallen by 10 per cent since the last quarter, with a high percentage remaining vacant for over six months.”
lbarnard@thenational.ae
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