Grade A and B office rents in Abu Dhabi are expected to fall by at least 10-15 percent during 2017 in the wake of continued contraction in demand, according to real estate firm Core Savills.
Its latest report said that despite lower demand from blue chips and large corporates, the current lack of prime Grade A+ office stock, exacerbated by growing Grade B stock, is expected to keep prime office rents relatively resilient to further drops.
Core Savills CEO, David Godchaux, said: “There is a broad mismatch between demand and supply, particularly in the Grade A and B markets.
“New local enquiry levels are concentrated on the footprint optimization/consolidation while international first phase expansions have been largely limited," he said.
The report added that expansion requirements are coming from Dubai-based firms who are looking to expand their presence in Abu Dhabi given the softening rents. These enquiries are concentrated within the healthcare, budget F&B, accounting, legal and other service based industries, it noted.
“A relative spike in activity levels may be triggered in vacant stock if landlords cater to the mismatched demand from smaller spatial requirements, by splitting offices and offering competitive rental rates to uplift occupancy levels,” added Godchaux.
Looking ahead, Core Savills said Al Maraya Island is expected to attract steady interest from corporate office occupiers for its premium commercial office facilities, due to the evident lack of similar grade buildings in the market.
Godchaux said: “The ongoing development of freezones and ports are actively diversifying revenue Abu Dh Dhabi’s streams while master residential communities are coming at par to house these economic clusters.
"The fact that emirate is comfortable with hydrocarbon reserves to fuel its future growth adds to the positive future momentum. This coupled with the increased activity on mergers and acquisitions in the oil and gas and financial services sectors translates towards integrated efficiency.”For all the latest real estate news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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