By Staff writer
JLL says demand for office space in the UAE capital has reduced due to the decline in oil prices
Average prime commercial property rents in Abu Dhabi decreased by 3 percent during the second quarter of 2016, with Grade B offices also seeing similar declines, according to a new report.
JLL's Abu Dhabi Real Estate Overview report said total office stock reached approximately 3.5 million sq m with the completion of ADNOC HQ on the Corniche and Bloom Central on Airport Road.
Approximately 145,000 sq m is expected to enter the market by the end of 2016 including ADIB HQ on Airport Road and Leaf Tower on Reem Island.
The report said that overall vacancy rate increased marginally due to limited new speculative supply and due to a slight increase in vacancy in some buildings, including a number of Grade A properties.
It added that the office market in the UAE capital has been the most negatively affected by the decline in oil prices and government spending.
Oil revenues are a key driver of the economy and office market - comprising half of Abu Dhabi's GDP. There are increasing signs of oil companies reducing their office requirements and relinquishing space, JLL said.
It added that indirectly, low oil prices have led to spending cuts in the government sector, with some government entities also reducing their office space, and a reduction in spending affecting other sectors.
JLL said current office requirements are limited and this is expected to continue due to the reduction in government spending.
David Dudley, international director and head of Abu Dhabi Office at JLL MENA, said: "Demand for office space has reduced due to the decline in oil prices directly impacting the oil related sector and indirectly impacting other sectors due to a slow-down in government spending.
"There is increasing evidence of oil companies and government entities reducing headcount and office space requirements."
He added: "While we expect market-wide vacancy rates to increase in the current period of weaker demand, Grade A vacancy remains relatively low and therefore we expect Grade A rents to be broadly upheld."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.