Average rents in Abu Dhabi are 11 percent lower than a year ago while sale prices have dipped 9 percent, acccording to a new report by consultants CBRE.
Its Q3 2017 Abu Dhabi MarketView report said rental values fell by a further 3 percent during the third quarter of 2017.
However, CBRE noted that the market is witnessing a mixed performance, with declines of 1-6 percent recorded depending on the specific location.
As a result, landlords are being forced to become more flexible in their negotiations with tenants, in order to lessen the potential void risk and strengthen tenant loyalty, the report added.
Mat Green, head of Research & Consulting UAE, CBRE Middle East, said: “Amidst falling rental prices, there remains an apparent shortage of housing units targeted towards the dominant low to middle income segments of the population. Whilst a number of mid-market projects have been launched and subsequently delivered, the size of these developments remains insufficient to cater to the overall market demand for affordable housing options."
In Abu Dhabi's sales market, CBRE said values have continued to soften, dropping by nearly 3 percent on a quarterly basis and 9 percent year-on-year.
The sustained downside in sales rates reflects the combination of weak transactional demand and overall negative market sentiment, the report noted.
CBRE also said that Abu Dhabi’s office sector continues to experience a softening of market conditions, as a contraction of employment growth and weak demand fundamentals add further pressure to both rental and occupancy rates.
Consequently, occupiers remain cautious with their capital expenditures and new office requirements have become more limited as a result. The report said there is also sustained evidence of tenants sub-leasing excess accommodation, as they strive to reduce operational overheads.
Average prime office rentals declined by 9 percent from the same period last year, while secondary office rents fell about 15 percent compared to Q3 2016.
There were no major new office completions observed during the quarter, meaning total existing stock remains at around 3.96 million sq m.
Green said: "There is now around 0.4 million sq m expected to be completed by 2019. However, in the current environment, there are likely to be further delays in delivery timeframes, as developers try to coordinate completion timings to better align with demand levels."
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