Mubadala pauses leasing at Sowwah Square until regulations come out

Lettings at Abu Dhabi’s largest new office development have been put on hold until the publication of new financial zone regulations that could affect tenants.

Mubadala has stopped signing up tenants at its 183,000-square-metre Sowwah Square scheme on Al Maryah Island in Abu Dhabi and at the nearby former Abu Dhabi Securities Exchange building until new rules governing the operations of the city’s financial free zone have been published.

Mubadala, the government-backed developer of Sowwah Square, previously stopped all new leasing activity at the vast office scheme in April last year, when the government passed Federal Decree 15 of 2013 establishing the new financial free zone, the company’s real-estate head said.

“At the moment no one knows what activities are allowed to happen on the island,” said Ali Eid Al Mheiri, the head of Mubadala Real Estate and Infrastructure. “All these things are unclear until the regulations are published.

“The rules will dictate what kinds of business activity are allowed on the island. Once the regulations come out, everyone on the island will have to look and see whether they will be able to conduct business on the island.

The company is waiting to see whether its existing tenants canoperate in the financial free zone under the new rules before signing up any more for the 98,000 square metres of space in the development’s remaining two office blocks.

It is also keeping a careful eye on the new regulations to see whether existing tenants will be able to continue operating on the island.

Mubadala said it had leased 98 per cent of the office space at its 40,000-square metre Al Silla office tower, and its 45,000-square-metre Al Maqam office tower was 86 per cent let.

Free-zone and onshore companies operate under different rules. Organisations must operate as one or the other or establish a parallel business to operate as both.

“The new free-zone regulation policy proposed for Al Maryah will determine the nature of future occupiers and potentially affect how existing tenants conduct their business going forward,” said Nicholas McLean, the managing director of the Middle East Consultancy at CBRE. “Some form of free zone or onshore nomination would allow the Abu Dhabi Financial District to provide maximum flexibility to businesses in Abu Dhabi.”

Mubadala also said that it had renamed the former ADX building in Sowwah Square. It was designed and built for the Abu Dhabi Securities Exchange to move into more than two years ago but the bourse never occupied it. ADX remains at its old headquarters on Hamdan Street in Abu Dhabi city centre.

The building has been renamed Financial Building, and some of the office space in the building is occupied by a team of about 20 people from the new Abu Dhabi Global Market body, which will regulate the new financial free zone.

Stephen Forster, a partner and head of the Abu Dhabi office for the law firm Al Tamimi & Company, a tenant at Sowwah Square, said: “As tenants we are still waiting for the detailed rules to come out. However, we are hoping that as tenants who are already here in the free zone we will be able to remain as an onshore entity. All the tenants here are watching with interest to see what the new rules say.”