Housing rents for existing tenants on Abu Dhabi’s Reem Island could fall by as much as 10 per cent by the end of the year, estate agents say.
The effect of job cuts across the oil and gas and construction industries and the fall in global oil prices could finally persuade landlords on Reem – the part of the city where most new supply is coming on stream – to lower rents for existing tenants starting by the autumn.
There are about 245,000 residential units in the newer areas of Abu Dhabi, with 4,000 more expected to enter the market this year, according to JLL.
Many of those homes will be on Reem Island, where the property broker predicts rents could dip by a 10 per cent after having rocketed up by 33 per cent between 2013 and last year.
“We expect vacancy rates to increase further in the second half of the year due to job cuts and people looking to either leave or downsize as their tenancies come up for renewal. This is expected to lead to a further discount in rents at a time-lag to vacancy increasing,” said David Dudley, the head of JLL’s Abu Dhabi office.
Mr Dudley said that demand slowed during the last quarter, amid announcements of job cuts and “a continued pause in government spending”, but in the short term, landlords had been holding the line on rents. “While there are signs of vacancy rates starting to increase slightly, many landlords are still able to maintain the same rental levels – with tenants often accepting this to avoid the additional costs and hassle of moving.”
According to property broker Asteco, rents for flats across Abu Dhabi fell by 2 per cent during the first three months of the year compared with the previous quarter, with the biggest drops concentrated on Reem Island.
It reported that apartment rents in the island’s Shams Abu Dhabi area dropped by 6 per cent quarter-on-quarter, ranging from Dh95,000 to Dh120,000 for a one-bed unit, or Dh130,000 to Dh170,000 per year for a two-bed.
But brokers say that these reports are heavily weighted towards new tenancies rather than renewals.
Existing Reem Island tenants report that landlords are continuing to increase rents, knowing tenants would rather stay than have to pay the thousands of dirhams in agency fees for new homes.
“We are aware of reports saying that rents in Abu Dhabi are falling but realistically it is unlikely that we will see many rents fall in Abu Dhabi until after the dust settles in October,” says Ben Crompton, the managing partner of Crompton Partners.
“By then, everyone who is moving out will have done so and landlords will have a better idea of the situation.”
Mr Crompton says that the large number of individual landlords on Reem Island means rent reductions are more likely there than elsewhere in the city, such as on the Corniche, where property is often owned by high-net-worth individuals and institutions better able to absorb the hit from vacancies.
lbarnard@thenational.ae
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Israel Palestine on Swedish TV 1958-1989
Director: Goran Hugo Olsson
Rating: 5/5
UAE currency: the story behind the money in your pockets
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Starring: Josh Hartnett, Saleka Shyamalan, Ariel Donaghue
Director: M Night Shyamalan
Rating: 3/5
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Company Profile
Name: Thndr
Started: 2019
Co-founders: Ahmad Hammouda and Seif Amr
Sector: FinTech
Headquarters: Egypt
UAE base: Hub71, Abu Dhabi
Current number of staff: More than 150
Funds raised: $22 million
WHAT IS GRAPHENE?
It was discovered in 2004, when Russian-born Manchester scientists Andrei Geim and Kostya Novoselov were experimenting with sticky tape and graphite, the material used as lead in pencils.
Placing the tape on the graphite and peeling it, they managed to rip off thin flakes of carbon. In the beginning they got flakes consisting of many layers of graphene. But when they repeated the process many times, the flakes got thinner.
By separating the graphite fragments repeatedly, they managed to create flakes that were just one atom thick. Their experiment led to graphene being isolated for the very first time.
In 2010, Geim and Novoselov were awarded the Nobel Prize for Physics.
COMPANY%20PROFILE
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About Okadoc
Date started: Okadoc, 2018
Founder/CEO: Fodhil Benturquia
Based: Dubai, UAE
Sector: Healthcare
Size: (employees/revenue) 40 staff; undisclosed revenues recording “double-digit” monthly growth
Funding stage: Series B fundraising round to conclude in February
Investors: Undisclosed
COMPANY%20PROFILE
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The biog
Place of birth: Kalba
Family: Mother of eight children and has 10 grandchildren
Favourite traditional dish: Al Harees, a slow cooked porridge-like dish made from boiled cracked or coarsely ground wheat mixed with meat or chicken
Favourite book: My early life by Sheikh Dr Sultan bin Muhammad Al Qasimi, the Ruler of Sharjah
Favourite quote: By Sheikh Zayed, the UAE's Founding Father, “Those who have no past will have no present or future.”
FIGHT%20CARD
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Company%20Profile
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How does ToTok work?
The calling app is available to download on Google Play and Apple App Store
To successfully install ToTok, users are asked to enter their phone number and then create a nickname.
The app then gives users the option add their existing phone contacts, allowing them to immediately contact people also using the application by video or voice call or via message.
Users can also invite other contacts to download ToTok to allow them to make contact through the app.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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