Prime retail developments in Abu Dhabi have continued to display stability in both rental and occupancy rates, according to a new report by real estate consultancy firm CBRE.
Its Q2 2016 Abu Dhabi MarketView said all major malls in the UAE capital have maintained high occupancy, in excess of 95 percent, driven by the local population and growing tourist numbers.
However, domestic and external economic challenges have impacted consumer confidence, prompting retail operators to put their business investments and expansion plans on hold in the short term.
According to the Q2 Abu Dhabi MarketView, the average prime office rentals remained flat at AED1,800/sq m/year, although, landlords are starting to offer tenants more flexibility with their leasing and payment terms as they strive to maintain and build tenant loyalty in order to uphold occupancy rates.
Commercial activities proved to be significantly weaker than in previous quarters, with the subdued business environment reflecting the quieter economic climate. The secondary market witnessed a further 2 percent drop quarter-on-quarter, maintaining its downward trend, the report added.
Mat Green, head of Research & Consulting UAE, CBRE Middle East, said: "The office sector witnessed low occupier demands in Q1 and has reflected a similar reoccurrence in the performance during Q2".
The report also said the residential sector has remained one of the capital's better performing sectors, aided by the low levels of upcoming supply in the short term.
The shift in dynamic has emerged amid ongoing downsizing across multiple industry sectors, which has resulted in weaker demand, specifically for high-end apartment products.
CBRE said more affordable units remain in demand, reflecting the demographic of the vast majority of expatriate workers. Rental rates for affordable units have remained steady with minimal fluctuation recorded against the general slowdown observed in the upper segments.
"With a growing number of new projects in the long-term pipeline, we expect to see an upward trajectory in annual supply in the coming years, with the bulk majority belonging to properties oriented towards the upper-mid to high-end segments", said Green.
According to the MarketView, the second quarter has proven to be more of a challenging period for the capital's hotel properties for the hospitality market, with Ramadan coinciding with the end of the normal season, culminating in weaker than normal tourism performance.
"The downward trend in performance reflected the combined adverse effects of increasing hotel competition, US dollar strength and an overall slowdown in tourism growth," said Green.
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