Despite a challenging 2020, Abu Dhabi’s market displayed resilience with modest drops in sales and rental values.
Office Market
- Most of the office demand in Abu Dhabi came from relocations where occupiers moved to similar-sized offices largely to upgrade to superior-grade buildings at similar or lower rental outflows as they took advantage of softened rentals.
- Many tenants also consolidated offices spread across multiple locations or floors within the same building to a single-level office.
- Most office movements stemmed from large occupiers in the oil & gas sectors, and government and semi-government entities and ranged between 500 to 2,000 Sq.m.
- A pivoting of occupiers towards Grade A space has led to limited Grade A stock in Abu Dhabi.
- With most of the office stock in Abu Dhabi being Grade B and C, we are witnessing a significant drop in rents and occupancy levels in this segment as most tenants look to relocate.
- With landlords being pushed further to offer better terms in the aftermath of COVID-19 making the market notably tenant-friendly, rent-free periods, rental deferrals, multiple check payments and contributions to fit-outs are becoming increasingly common.
- Established tenants with strong cash flow are looking to lock in longer lease terms to take advantage of the commercial terms being offered in the current market.
- We expect these trends to continue over to H1 2021 as the market continues to adjust to ongoing economic conditions.
Industrial Market
- Abu Dhabi’s industrial and warehousing sector defied market conditions with both enquiry and transaction levels seeing an increase in 2020.
- We have seen rising demand for warehousing space from both online and brick-and-mortar retailers as they expand their offerings to cater to increasing online demand.
- In other industrial sectors, apprehension of further supply chain disruptions is also fuelling occupiers to store stock, thus requiring more space, particularly for essential and non-perishable goods.
- ICAD and Mussafah rentals hold steady year-on-year due to the limited availability of stock
- KIZAD is also taking a more active role in managing leasing and maintaining occupancies.
- Mussafah is witnessing a steady demand for warehouses with tenants also requesting the option of office space within the same facility,
Retail Market
- We have seen many retailers significantly increase their online presence and scale-up back-end operations and logistics to accommodate this shift.
- We have also witnessed community retail and smaller ground-floor retail outlets perform relatively well as they largely cater to essential retail. *While there are many government and landlord-led incentives, mall retail continues to face challenges as retailers look to optimise their footprint and reduce costs across the retail group/portfolio.
- Most retailers are turning to revenue share models to withstand market conditions.
- Landlords are also being perceptive to these conditions and realise that rent deferrals may not be a viable solution and are open to revenue share models to maintain occupancy and a good retail tenant mix.
- In terms of retail supply, there were no major retail handovers in 2020 with Reem Mall expected to be handed over by the end of 2021, adding over 270,000 Sq.m. of retail GLA.
Residential Market
- There were over 4,500 units delivered in Abu Dhabi in 2020 with most handovers located in Al Raha Beach, Al Reem Island and Yas Island.
- For the first time in five years, average villa sales prices witnessed a 2% year-on-year increase.
- Apartment prices saw a nominal -4% drop.
- We continue to see a flight to quality and affordability from both end-users and investors. *Softening market conditions have resulted in both homebuyers and tenants having more bargaining power when negotiating sales terms.
- We witnessed a relative level of stability in average rents in the villa market with only a 3% year-on-year drop as rents started to stabilise over H2 2020.
