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Mon 20 Apr 2015 01:25 PM

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Oil price slump hits demand for Abu Dhabi offices in Q1

New CBRE report says rents rise by 3% despite emergence of more challenging market conditions

Oil price slump hits demand for Abu Dhabi offices in Q1
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)

Abu Dhabi prime office rents saw increases of around three percent despite the emergence of more challenging market conditions in the first quarter of 2015, CBRE said on Monday.

According to its Q1 2015 Abu Dhabi MarketView, demand for commercial property in the UAE capital has been impacted by the recent oil price slump.

The report added that average prime rentals are expected to remain stable for the remainder of this year.

The Q1 rent increase was the first quarterly increase recorded since Q1 2014, CBRE said, adding that the average prime office rentals were AED1,900 per sq m.

Mat Green, head of Research & Consultancy UAE, CBRE Middle East, said: “Whilst we have seen a slight increase in office rentals, Abu Dhabi’s commercial sector has stagnated with limited new demand emerging amidst a period of low oil pricing and uncertain economic conditions both regionally and globally.

“Despite the limited availability of Grade A office accommodation, average prime rentals are expected to remain broadly stable in the coming quarters, as weak occupier demand limits short term growth potential.

"However, as premium office towers start to near full occupation we can expect to see rentals rise further,” said Green.

He added: “Prime offices will continue to enjoy stronger demand with further growth prospects for both occupancies and rentals on the back of limited new good quality supply.

"However, with rising secondary office stock, the flight to quality trend will become increasingly evident, as rentals fall further for inferior accommodation.”

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