New Knight Frank report says vacancies likely to rise as extra 80,000 sq m of office space is forecast in 2018
Average rents in Abu Dhabi’s office market continue to decline although recent positive macroeconomic data may mean a more optimistic outlook for the sector in the coming year, according to a new report.
Real estate consultants Knight Frank said that in the year to the end of September, average grade A rents across the city have fallen by 11.5 percent.
Prime market rents in Q3 on average stood at AED1,774 per sq m per year, Grade A at AED1,150 while citywide rents averaged AED1,167.
Taimur Khan, senior analyst, said Q3 vacancy rates remained relatively stable at 23 percent, given that supply is forecast to increase by up to an additional 80,000 square metres in 2018, adding that the overall vacancy rate is set to increase slightly.
"On the back of continued sluggish economic performance, Abu Dhabi’s occupier rental rates continued to trend down across all segments of the market. With weaker demand from the public sector and oil sector firms being the most significant factor underpinning the trend," he said.
He added: "Activity in the market continues regardless of these major cutbacks, however the vast majority of space requirements are in the 100 sq m to 500 sq m range with general trading and professional trading firms making up the majority of demand."
Knight Frank said the short to medium term outlook for Abu Dhabi’s office market remains negative, not all of the forecast supply is expected to come to fruition.
According to data from MEED Projects, the value of projects awarded in the office sector in 2017 has significantly decreased in comparison to projects awarded in 2016.
Matthew Dadd, head of commercial leasing and agency at Knight Frank said: "The slowdown in new supply could provide a floor to rental values across the capital in the long run. This is particularly the case in the Prime and Grade A segment, where supply is already somewhat limited. These segments of the market begin to bottom out at a faster rate compared to the mainstream market."