Apartment rental rates for prime buildings are on the increase in Abu Dhabi according to the latest Asteco market report, following a slow start to the year.
In its Q2 2015 Abu Dhabi report, the Middle East’s largest independent full service real estate company reported a 6% rise in the last quarter; with the first six months of 2015 recording positive overall market dynamics for the sector.
The majority of prime, high and mid-quality developments increased by 4% to 6% upon contract renewal; whereas new leases were, on average, 8% higher than in Q1 2015.
Some of Abu Dhabi’s most popular prime developments, such as the Eastern Mangroves and St Regis Residences by TDIC, recorded rent renewal increases of 12% and 10% respectively, with long prospective tenant waiting lists, indicating the continued lack of prime quality supply in the Capital. However, prime apartment buildings located on the Corniche recorded little or no increase in Q2, with rental rates already at a premium.
“This turnaround of events is attributable to the gradual stabilisation of sales prices over the last six months, allowing for strengthened yields and positive long term prospects for landlords,” said Jerry Oates, General Manager, Asteco Abu Dhabi.
Sales prices for apartments and villas remained steady, continuing the trend of the last 12 months, although year-on-year figures showed average positive growth of 4% in apartment sales prices.
Rental demand for quality villa stock in high-end developments also augurs well for potential investors with continued optimum occupancy rates for what stock there is available, with Asteco predicting an increase in rental rates over the next few months in the absence of any major handover of new villa stock before 2017.
A number of high profile launches did however take place during Q2, predominantly located on Reem, Yas and Saadiyat Islands, including Aldar’s West Yas and Mayan on Yas Island; with Reem welcoming New Horizon, by Tamouh; Meera from Aldar; and Aabar’s The Kite. Saadiyat Island also saw some new launches such as Bloom Properties’ Park Views, which achieved sales rates between AED 1,750 – 1,850 per square foot.
“These launches will add in excess of 3,600 new apartment units to the market from 2018, in addition to the 1,800 units announced during 2014, bringing much needed new supply to Abu Dhabi’s market. This is also a strong indication that developers are optimistic about market prospects, and both buyers and tenants will ultimately benefit from more choice,” said Oates.
Demand for high-end villas has also been positive in Q2, with Asteco highlighting the successful launch of TDIC’s Jawaher Al Saadiyat and Hidd Al Saadiyat developments, priced at AED5.7 million to AED25 million and from AED7.5 million to AED38 million, respectively.
Emirati investors jumped to invest in the first phase of Aldar’s master-planned Al Merief project in Khalifa City and Nareel Island located on the north-western corner of Abu Dhabi Island, with plot sales reserved for UAE nationals.
The recent issuance of a decree by HH Sheikh Khalifa Bin Zayed Al Nahyan, President of the UAE and ruler of Abu Dhabi, aimed at regulating and improving transparency in the local real estate sector will further boost market confidence and act as a catalyst for increased investor demand.
“This as-yet-unenacted legislation will effectively protect investor interests in uncompleted projects, as it requires that brokers and developers be fully licensed. When it comes into effect it will further cement the reputation of the emirate as a credible long term investment haven,” noted Oates.
While residential is showing strong growth potential, office rental rates remained stable in Q2 2015 due to significant availability in key locations across the city, including new prime supply, which has put pressure on rates of lower quality space in particular. However, Asteco notes that slow but steady growth continues to be recorded for prime office space, with a 7% increase recorded over the last six months.
With Abu Dhabi Global Markets (ADGM), the new international financial centre on Al Maryah Island, beginning to accept license applications from mid-June for existing non-financial services tenants that have either a Private Limited or a Branch Office legal structure, which marks the first phase of the formal establishment of the Al Maryah Free Zone,” said Oates.
“This has meant that the previously delayed leasing of the two other ADGM buildings has now been resumed. The handover of the Al Hilal Bank office building is also anticipated within the next few months, bringing imminent new prime Grade A supply to the capital,” he added.
However, the unveiling of one of the first strata-owned office spaces, with the recent handover of ADDAX Tower, had negative impact on rental rates, which, says Asteco, is due to the fact that rental rates are likely to differ between owners, with initial asking rates ranging from AED 1,150 - 1,350 per square metre.
For more details, please visit www.asteco.com
A copy of the full Asteco Q2 2015 Abu Dhabi report can be downloaded from – www.asteco.com/valuation-advisory/overview/
NOTES TO EDITORS
Asteco, a major regional and international real estate services firm and the largest property services company in the United Arab Emirates, was founded in Dubai in 1985. Asteco offers independent market analysis, design development consultancy and valuation services, sales and leasing services, as well as asset and property management services.
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