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Mon 27 Jul 2015 01:45 PM

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Cheap oil hits demand for Abu Dhabi office space

New JLL report says low oil prices result in depressed demand for corporate space in UAE capital in Q2

Cheap oil hits demand for Abu Dhabi office space

Demand for office space in Abu Dhabi remained flat during the second quarter of 2015 as depressed oil prices continued to impact the market, Jones Lang LaSalle said on Monday.

In a new report, JLL said the decline in oil prices directly impacted the oil related sector and indirectly impacted other sectors due to a slow-down in government spending.

Large-scale requirements continue to be driven by the government sector and state-owned enterprises with the bulk of private sector demand focused on smaller office suites, the report said.

JLL said total office stock in the UAE capital reached approximately 3.2 million sq m gross leasable area (GLA) in Q2, with the delivery of new space at Masdar City, Abu Dhabi International Airport and Capital Centre adding 48,000 sq m.

An additional 140,000 sq m of office GLA is expected to enter the market throughout the year, the report added.

In spite of weak demand, Grade A office rents have remained stable due to minimal vacancies within Grade A stock, with average Grade A and B office rents remaining at AED1,730 per sq m and AED1,180 per sq m respectively, JLL said.

David Dudley, international director and head of Abu Dhabi Office at JLL MENA, said: "Further office completions throughout the year are expected to slightly increase the market-wide vacancy rate, but with a significant proportion of high quality office space being pre-committed, we expect Grade A rents to be upheld."

The report said retail stock in Abu Dhabi reached 2.6 million sq m GLA with the only delivery being Al Shamkha Community Mall adding approximately 43,000 sq m of retail space.

About 54,000 sq m of retail space is expected to enter the market by the end of 2015, largely as non-mall retail within mixed-use developments.

Retail rents remained stable during Q2 and this is expected to continue in the short-term, said JLL which added that retail supply is expected to increase significantly from 2018 with the delivery of new super regional malls.

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