Prime Abu Dhabi office rents slump 12% in Q2

OFFICE RENTS: Commercial property rental values fell 12 percent in Q2, according to Jones Lang Lasalle. (Getty Images)

Average grade A office rents in Abu Dhabi slumped by 12 percent in the second quarter of 2010 as new supply continued to enter the market, a new report has said.

Jones Lang Lasalle said Q2 also saw vacancy rates of eight percent across the city which were likely to increase over the coming years due to an imbalance in supply and demand.

The consultancy forecast that an additional 1.2 million sq m of office supply would enter the Abu Dhabi market before the end of 2012, adding that a significant proportion of new supply would not meet Grade A standards, where future demand would lie.

Year-on-year, office rents for prime office space in the UAE capital was down by 27 percent, the JLL report said, adding that they would fall further in the third quarter of 2010.

Grade A office rents stood at AED2,200 per sq m per year in Q2, a drop of AED800 on the same period in 2009, the study showed, and down AED300 on Q1 2010.

Office rents peaking in the fourth quarter of 2008 when they hit AED3,800 per sq m per year.

"Office rents are epxected to continue to fall in line with increasing vacancies creating opportunities for tenants to upgrade their space without increasing costs," the report said.

It added that Abu Dhabi's office market performance would continue to be affected by Dubai where there was an "abundance of supply, lower property rentals and more developed urban infrastructure".

CB Richard Ellis said in a report earlier this month that the recovery of office rents in Dubai International Financial Centre (DIFC) was still lagging behind most of Europe, the Middle East and Africa.

While most cities saw flat or marginal gains in rental values in the second quarter of 2010, DIFC experienced the largest drops of more than 50 cities surveyed in the EMEA region.

CB Richard Ellis said the DIFC rents fell on average by 7.5 percent in Q2 while the average for all cities covered in the survey was a 0.5 percent increase.

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