Demand for office space in Abu Dhabi is picking up, as companies take advantage of falling lease rates to move into higher quality buildings, CB Richard Ellis (CBRE) reports. The drop in rates is driving a "flight to quality," CBRE reports in its analysis of the first quarter released today. "We're seeing a lot of demand in the market," said Rupert Bowen-Jones, senior surveyor for CBRE. Interest is coming from companies with existing operations in Abu Dhabi, not companies moving into the market, he said. An unprecedented surge in office construction is driving companies to seek better space. The supply of office space in Abu Dhabi is expected to reach 3 million sq metres by the end of the year, a 35 per cent increase from 2010, CBRE reported. But only a few of the new buildings are considered "Grade A" buildings, with an array of amenities, including Al Sowwah Square, <a href="gopher://topicL3RoZW5hdGlvbmFsL09yZ2FuaXNhdGlvbnMvQ29tcGFuaWVzL1VBRSBjb21wYW5pZXMvQWxkYXI=" inlink="topic::L3RoZW5hdGlvbmFsL09yZ2FuaXNhdGlvbnMvQ29tcGFuaWVzL1VBRSBjb21wYW5pZXMvQWxkYXI=">Aldar</a> HQ and International Tower in Capital Centre. With demand focused on the top space, rents have started to stabilise in prime Grade A buildings at more than Dh2,300 a sq metre, 40 per cent above the overall average in the city of Dh1,650 a sq metre, according to CBRE research. But rents are continuing to slide in older buildings. Office space can be found as low as Dh1,100 a sq metre in the lower end of the market, CBRE said. Office rents in the capital peaked at more than Dh4,500 a sq metre in the third quarter of 2008, CBRE reports. Landlords are also offering longer term deals and incentives like free rent for a short time period to woo tenants. "With massive new supply looming, landlords are also seeking greater security amid fears of rising vacancies," the consultancy reported. International demand is expected to pick up through the year, but it hasn't happened yet, Mr Bowen-Jones said. "There are companies setting up here, but these companies typically want smaller space," he said. CBRE's data is in line with reports from other property firms. Average office rents in Abu Dhabi have fallen 29 per cent since a year ago, according to Cushman & Wakefield.