Abu Dhabi rents rose 16% in 2013

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Abu Dhabi villaRentals in the UAE’s capital Abu Dhabi increased by an average of 16 per cent in 2013, with the strongest growth recorded during the final quarter when rates rose by as much as 9 per cent, according to the latest Abu Dhabi MarketView by real estate consultancy CBRE released on February 18.

Rental increases were highest for one bedroom units which jumped 11 per cent during the quarter.

The Abu Dhabi residential sector returned to growth during 2013, albeit in highly fragmented fashion, CBRE said. The recovery is expected to gather further momentum over the next 12 months, as the impact of the recent rent cap removal is felt in earnest.

“The recent move comes at a time when housing demand was already on the rise, following the earlier government intervention to change the conditions under which state run companies paid housing benefits to their employees,” said Mat Green, Head of Research & Consultancy UAE, CBRE Middle East.

“Despite Abu Dhabi’s impressive return to growth, the market remains polarised in its performance, with significant variation found between the emirates key residential locations and by the age of the specific property. With a large portion of the capitals housing stock now quite dated in appearance, there has been widespread tenant migration towards new developments upon completion, which in turn has resulted in sustained rental deflation for many older units,” Green added.

The CBRE report states that the rental gap between properties location off-island and those in on-island locations remains firmly intact, with apartments in off-island locations 44 per cent cheaper than those on the main island. The average annual rental for a two bedroom apartment unit off-island is now Dh66,500 per annum. This compares with Dh115,000 per annum on-island.

“Whilst rental growth appears to be a new reality for the majority of residential tenants, the high volume of expected new supply may at least help to curb some of these inflationary pressures, although again this is likely to be location specific and dependent on the local market fundamentals. Over the next three years, roughly 40,000 new residential units are forecast for delivery across the capital with close to 45 per cnet to be completed on Reem Island alone,” said Green.

Commenting on the outlook of the residential market, Green stated, “We can expect an increase in the level of residential investment activity, particularly within established master plan locations. This in turn may lead to an increase in the number of new construction starts as we move through 2014, after what has been a relatively quiet period for the new development launches.”

The Abu Dhabi office market on the other hand witnessed a relatively quiet quarter, with only the sustained activity from the public sector helping to maintain the markets forward momentum, notes the CBRE report. This was reflected by a quarter of flat rental growth, with both prime and secondary rentals remaining static.

According to the report, average prime rentals for Grade A commercial office spaces remained stable at Dh1,850 per square meter per annum, although variation in headline rents were still evident, dependent on the quality of the individual tenant, lease structure and incentive packages. Secondary office rental rates also remained steady at Dh1,200 per square meter per annum, although further rental deflation is expected during 2014 as new good quality developments are completed, and as the current flight to quality continues.

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Reading Time: 3 minutes

Rentals in the UAE’s capital Abu Dhabi increased by an average of 16 per cent in 2013, with the strongest growth recorded during the final quarter when rates rose by as much as 9 per cent, according to the latest Abu Dhabi MarketView by real estate consultancy CBRE released on February 18.

Reading Time: 3 minutes

Abu Dhabi villaRentals in the UAE’s capital Abu Dhabi increased by an average of 16 per cent in 2013, with the strongest growth recorded during the final quarter when rates rose by as much as 9 per cent, according to the latest Abu Dhabi MarketView by real estate consultancy CBRE released on February 18.

Rental increases were highest for one bedroom units which jumped 11 per cent during the quarter.

The Abu Dhabi residential sector returned to growth during 2013, albeit in highly fragmented fashion, CBRE said. The recovery is expected to gather further momentum over the next 12 months, as the impact of the recent rent cap removal is felt in earnest.

“The recent move comes at a time when housing demand was already on the rise, following the earlier government intervention to change the conditions under which state run companies paid housing benefits to their employees,” said Mat Green, Head of Research & Consultancy UAE, CBRE Middle East.

“Despite Abu Dhabi’s impressive return to growth, the market remains polarised in its performance, with significant variation found between the emirates key residential locations and by the age of the specific property. With a large portion of the capitals housing stock now quite dated in appearance, there has been widespread tenant migration towards new developments upon completion, which in turn has resulted in sustained rental deflation for many older units,” Green added.

The CBRE report states that the rental gap between properties location off-island and those in on-island locations remains firmly intact, with apartments in off-island locations 44 per cent cheaper than those on the main island. The average annual rental for a two bedroom apartment unit off-island is now Dh66,500 per annum. This compares with Dh115,000 per annum on-island.

“Whilst rental growth appears to be a new reality for the majority of residential tenants, the high volume of expected new supply may at least help to curb some of these inflationary pressures, although again this is likely to be location specific and dependent on the local market fundamentals. Over the next three years, roughly 40,000 new residential units are forecast for delivery across the capital with close to 45 per cnet to be completed on Reem Island alone,” said Green.

Commenting on the outlook of the residential market, Green stated, “We can expect an increase in the level of residential investment activity, particularly within established master plan locations. This in turn may lead to an increase in the number of new construction starts as we move through 2014, after what has been a relatively quiet period for the new development launches.”

The Abu Dhabi office market on the other hand witnessed a relatively quiet quarter, with only the sustained activity from the public sector helping to maintain the markets forward momentum, notes the CBRE report. This was reflected by a quarter of flat rental growth, with both prime and secondary rentals remaining static.

According to the report, average prime rentals for Grade A commercial office spaces remained stable at Dh1,850 per square meter per annum, although variation in headline rents were still evident, dependent on the quality of the individual tenant, lease structure and incentive packages. Secondary office rental rates also remained steady at Dh1,200 per square meter per annum, although further rental deflation is expected during 2014 as new good quality developments are completed, and as the current flight to quality continues.

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