Capital attracts office renters from Dubai as companies shift focus

Abu Dhabi makes up for migration north of residential tenants

Abu Dhabi landlords are starting to benefit from a migration of corporate occupiers from Dubai, leasing agents say. As prices in Abu Dhabi decline and new high-end commercial space comes online, these companies see an opportunity to increase their presence in an economy fuelled by oil exports. "We are starting to see evidence of multinational companies who have had up until now a larger presence in Dubai as compared to Abu Dhabi, shift their focus," said Piers Barttelot, a leasing director at the property consultancy Jones Lang LaSalle.

"They are now looking into the feasibility of downsizing in Dubai and upsizing in Abu Dhabi." The changes are the reverse of the country's residential market, which has in the past 18 months seen more people with jobs in Abu Dhabi moving to Dubai's more developed projects such as Downtown Burj Khalifa and Jumeirah Beach Residence. Another 1.2 million square metres of office space is expected to be delivered in Abu Dhabi by the end of 2012, half of which will be in the large master-planned areas such as Al Reem Island, Al Raha Beach and Sowwah Island.

As these buildings are completed and opened to tenants, the commercial market will undergo a major change, analysts say. Companies will move from villa offices into proper office buildings; high-profile tenants will relocate to more prestigious buildings; and the vacancy rate will rise until the economy can provide growth needed to fill available space. These factors are expected to lead to the emergence of a more powerful renting class who will be able to negotiate lower rents and demand better contracts.

"Until now businesses have had to make do with very poor-quality stock," said Harry Goodson Wickes, a leasing agent at the property consultancy Cluttons. "The new space becoming available is going to mean big changes." Mr Goodson said he had begun receiving inquiries from companies that have most of their employees in Dubai, but were planning to shift more to Abu Dhabi. "Most international companies are only running satellite offices in Abu Dhabi now, but they want to bring down staff from Dubai," he said.

One building that may play a crucial role in drawing such companies to the capital is Aldar's coin-shaped headquarters building, located 45 minutes' drive away from Dubai near the Abu Dhabi International Airport. Aldar said Advanced Technology Investment Company, an Abu Dhabi Government-owned investment company, had leased 6,840 sq metres of space in the building. The company signed a seven-year lease with Aldar, which is a sign of the changing attitude toward office rentals.

A typical Abu Dhabi commercial lease can be for just a few years. "ATIC was looking for space in Abu Dhabi and Dubai," said Mohammed Mubarak, the chief commercial officer of Aldar. "They found they would be best situated at Aldar HQ." About 50 per cent of the building is in the final stages of negotiation for leases, with the rest being negotiated with prospective tenants, Mr Mubarak said. [e-mail]