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Sat 12 Apr 2014 10:22 AM

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Abu Dhabi rents rise nearly 10% in Q1, says CBRE

Report says off-island locations becoming more popular as affordability fast becomes concern in UAE capital

Abu Dhabi rents rise nearly 10% in Q1, says CBRE
Skyscrapers stand on the skyline viewed from the Central Market in Abu Dhabi, United Arab Emirates, on Wednesday, Jan. 11, 2012. Abu Dhabi, the oil-rich sheikhdom that spent 36 billion Dirhams ($9.8 billion) bailing out its biggest developer in 2011, will probably reach for its checkbook again as property companies in the United Arab Emirates face a stalled market and deadlines to repay debt. (Credit: Bloomberg News)

Residential rentals in Abu Dhabi have achieved significant growth during the first quarter of 2014, with an average rise of close to 10 percent, according to a new report by CBRE.

The report by the real estate consultancy also said housing units in off-island locations experienced higher rent growth at 14 percent during the period.

According to the report, two bedroom apartments within the Al Reef Downtown development currently range between AED80,000 -105,000 per annum, while similar property types within mainland locations have rentals from AED65,000-85,000 per annum.

Annual rents for a typical two bedroom city centre apartment are now observed between AED95,000-130,000 per annum, whilesimilar residential units within prime developments have rentals between AED150,000 -210,000.

Mat Green, head of Research & Consultancy UAE, CBRE Middle East, said: "With affordability fast becoming a concern for many residents, there has been a steady rise in demand for more affordable housing options, with off-island locations such as Khalifa City A and Mohammed Bin Zayed City becoming popular choices for the more budget focused tenants.

"Units within master-planned developments in mainland locations, including Al Reef Downtown, Al Ghadeer and Hydra Village, are now commanding rentals that are significantly higher than similar non-community based properties."

Residential sales rates saw little movement during the quarter, typically ranging between AED10,225-15,070 per sq m for areas such as Al Raha Beach and Reem Island.

However, with market conditions improving, CBRE said it anticipates escalating sales growth in the coming quarters amid rising rentals and stronger demand.

"Abu Dhabi residential market looks set for a period of sustained price and rental growth. This follows on from 12 months of steady recovery during 2013," said Green.

According to the report, the UAE capital's office market witnessed stronger commercial interest and more leasing transactions being completed. A total of 850,000 sq m of new office accommodation will be delivered over the next 24 months which is expected to maintain deflationary pressures in the secondary rentals market.

"The government and hydro-carbon sectors remain the principal demand generators for the office sector. A positive economic outlook is also fueling renewed investor appetite and rising business confidence across the capital," said Green.

During Q1, prime rents remained flat at AED1,850 per sq m per annum, with rentals typically falling in the range of AED1,600-2,100 per sq m per annum, the report said.

In contrast to the relatively stable prime rental performance, secondary office products continue to slide with rentals falling by close to 2 percent from the previous quarter. Average annual rentals for a typical secondary office space are observed at AED1,175 per sq m per annum, 6 percent lower than during the same period 12 months ago.

"The contrasting performances of the prime and secondary office markets mirror the prevailing demand dynamic which is driven by occupier flight to quality. It also highlights the negative impact of rapidly rising secondary stock levels which have been key in maintaining the trend of rental deflation for secondary accommodations," added Green.

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