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Prime office rents have started to rise; growth in residential sale prices continues
ABU DHABI, 7 October 2014 - JLL, the world's leading real estate investment and advisory firm, has released its third quarter (Q3 2014) Abu Dhabi Real Estate Market Overview report, which provides the consultancy's perspective on the latest trends in the office, residential, retail and hotel sectors in the market.
Commenting on the report, David Dudley Head of JLL's Abu Dhabi office , said: "The third quarter of 2014 recorded the continued growth of prices in the residential market and growth in office rents, with continued stabilization in the hospitality, retail and office sectors. All sectors of the Abu Dhabi market are now positioned in the recovery stage of their cycle, for the first time since 2008.
Mr. Dudley continued: "Residential remains the strongest performing sector driven by positive investor sentiment and population growth and potential future under-supply. The office market has witnessed growth for the first time after being stable for the past 2 years. Vacancy rates are reducing due to increased market absorption and a reduction in speculative supply in the pipeline. Retail rents for malls on Abu Dhabi Island have remained stable this quarter, with some malls outside the Abu Dhabi Island seeing a marginal increase in rents as they have witnessed higher footfalls. The Abu Dhabi hotel sector continues to recover, with the year to August seeing higher occupancies (71%) compared to 2013 (64%). For the first time, Abu Dhabi hotels experienced higher occupancies than Dubai in July (55% compared to 50%)."
Sector summary highlights, Abu Dhabi Market Overview, Q3 2014:
Office: Vacancy rates are expected to remain stable, with rental growth returning as existing vacancies are absorbed. While rents have increased by 6% in Q3 2014 averaging AED 1,640 / sq m from AED 1,540 / sq m in Q2 2014 for prime space, secondary space rents have remained stable at AED 1,180 / sq m. There is evidence of occupier requirements and market absorption improving and the supply pipeline is reducing relative to previous years and is dominated by owner occupied buildings. Supply completions during the third quarter of 2014 were limited to the handover of the Abu Dhabi Plaza Complex mixed-use building on Hamdan Street. With no other major deliveries, the total office stock remains around 3.1 million sq m.
Residential: Around 1,200 units were added to the residential stock during Q3 with the delivery of the B2 building on Reem Island and the Abu Dhabi Plaza Complex on Hamdan Street. Emirati families have also received new houses within Al Falah scheme this quarter. These deliveries bring the total residential stock to approximately 242,000 units at the end of Q3 2014. Sales prices for residential units (apartments and villas) increased slightly by 6% during Q3 to reach approximately AED 16,000 per sq m, while rents for prime residential units have remained stable at AED150,000 pa. Housing demand remains strong across all price points driven by population growth.JLL expects a future housing shortage as near term supply deliveries are below historic averages at a time of strong demand and predicts further rental increases over the short term.
Retail: Average line store retail rents for malls on Abu Dhabi Island have remained stable this quarter at AED 3,000 / sq m per annum, while rents for malls outside Abu Dhabi have increased marginally by 2% to reach approximately AED 3,000 per sq m per annum. No major deliveries took place during the third quarter, with the retail stock remaining stable at 2.2 million sq m. However, over 400,000 sq m of retail GLA is expected to enter the market by the end of 2014, dominated by the delivery of Yas Mall on Yas Island together with Capital Mall within the 9712 BMC. Recent announcements of new Super Regional malls such as Sowwah Central, Saadiyat Mall / The District and Reem Mall together with the planned Marina Mall extension will increase Abu Dhabi's retail supply significantly by 2017 / 2018.
Hotel: No hotel completions took place during Q3 2014, however, two hotel apartment buildings have opened including Adagio Al Bustan on Airport Road and Grand Mercure Residence on Zayed the 1st Street. There remains significant demand for long term hotel apartments, with this sector comprising a major component of the demand in areas such as Yas Island. The market is responding to this demand with a number of additional hotel apartments expected to enter the market by the end of 2014 including Capital Centre Arjaan at Capital Centre and Danat Residences at Danat.
Abu Dhabi prime rental clock
This diagram illustrates where JLL estimate each prime market is within its individual rental cycle as at the end of the relevant quarter.
*Hotel clock reflects the movement of RevPAR.
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