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Abu Dhabi Q3 Real Estate Update

October 2016

October 19, 2016 | 12:50 | Dubai

JLL released its Q3 2016 Abu Dhabi Real Estate Market Overview report which assesses the latest trends in the office, residential, retail and hotel sectors.

The latest market summary report discusses ongoing weak demand across the office, residential and retail sectors which has been evident since the decline of oil prices at the end of 2014 and continues to impact government spending and general sentiment. However, amidst general spending cuts there is increased evidence of continued government investment in Abu Dhabi’s mega tourism projects and overall positive demand in the hospitality market.

Commenting on the hospitality sector, David Dudley, International Director and Head of Abu Dhabi Office at JLL MENA, said: “The general trend for Abu Dhabi’s hospitality market has been positive growth of tourism demand being offset by a decline in corporate demand and new supply completions. In balance this has resulted in a slight increase in demand reducing pressure on occupancy rates but a decline in average room rates.”


Sector summary highlight – Abu Dhabi

Office: This quarter there were no deliveries in Abu Dhabi, keeping the total office stock stable at approximately 3.5 million sq m of gross leasable area (GLA). Approximately 50,000 sq m of GLA is expected to enter the market by the end of 2016 with the delivery of ADIB HQ on Airport Road.

The majority of office demand in Abu Dhabi is from oil and government entities.

The overall vacancy rate has continued to increase marginally over recent months.  The decline in demand has generally been mitigated by the lack of new speculative supply and therefore vacancy rates remain slightly lower than a year ago.

 

Residential: The residential market in Abu Dhabi continues to face downward pressure as rents and sale prices registered quarter on quarter (Q-o-Q) declines and annual declines versus Q3 2015.

The demand for residential also declined due to the reducing population with a further wave of job cuts within government, oil and gas, and financial services sectors.

Retail: No major completions took place during Q3, with total retail stock remaining at approximately 2.6 million sq m GLA. Approximately 51,000 sq m of retail GLA is expected to be delivered by the end of 2016, primarily within mixed-use schemes.

However, supply is expected to increase drastically by 2018 with the delivery of Al Maryah Central Mall and Reem Mall amongst others.

Hotel: Abu Dhabi’s hotel performance remained under pressure over the first eight months of the year. ADRs declined by 10% in year-to (YT) August 2016 figures when compared to the same period last year. City wide ADRs stand at $121 in YT August data. Overall occupancy rates stand just slightly below to their YT August 2015 levels at 70% (-2.3 ppt). As a result, RevPAR lost 12% to reach $85 over the first eight months of the year.

 

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