Skip Ribbon Commands
Skip to main content

News Release

Abu Dhabi

Abu Dhabi Real Estate Market showing initial signs of decline in Q2, as the slowdown in government spending and sentiment continues

According to JLL Real Estate Market Overview

​​​JLL, the world's leading real estate investment and advisory firm, today released its second quarter (Q2 2016) Abu Dhabi Real Estate Overview report that assesses the latest trends in the office, residential, retail and hospitality sectors.

JLL reported that, after 18 months of relatively stable conditions with the lack of demand growth being matched by minimal growth in supply, the market is now starting to show initial signs of declining performance.

David Dudley, International Director and Head of Abu Dhabi Office at JLL MENA, commented: "Demand has been weak since the decline in oil prices at the end of 2014 – impacting the oil sector, government spending and general sentiment. However, while demand took a big hit, annual supply completions have been at an all-time low, leading to relatively stable market conditions over the last 18 months – characterised by low vacancy rates in high quality stock and prime rents generally remaining stable across each asset class."

"During Q2 2016, we have started to see the first signs of a downward trend as the decline in the oil sector, reduced government spending and weak sentiment continues. While supply remains stable, the reduction in demand has now started to cause vacancy rates to nudge upwards, indicating we have now reached a tipping point with rents declining for the first time in 3 years."

JLL reported that the oil sector comprises half of Abu Dhabi's GDP  therefor, the reduced oil price and the announcement by ADNOC that it plans to cut 5,000 jobs by year-end, has had a major impact on GDP and employment growth. The reduced oil price has also resulted in a continued pause in government spending on economic diversification and infrastructure and job cuts in the government sector, impacting the other half of the economy. Recent announcements of mergers between NBAD / FGB and Mubadala / IPIC may lead to further rationalisation.

David Dudley added "We expect the impact of these job cuts and reduced incomes to become more pronounced over the summer, as some people look to either leave or downsize. This will push vacancy rates up further and cause rents to decline at a time-lag but given the numbers we are  talking about relative to the overall size of the market, this is expected to be a soft correction rather than a sharp decline."

He continued "While we commend the government's prudent approach to re-prioritising spending in the current period of low oil prices, we hope that the tap is not turned off for too long or Abu Dhabi will lose the momentum it has built and we could enter a more damaging downward spiral. The extent to which a down turn can be mitigated depends on the return of domestic government spending in spite of a reduction in oil revenues."

He commented further "The good news is that government remains committed to the 2030 Vision and has recently announced its priority projects to 2020. While we are going through a period of weaker demand, demand growth continues from projects commenced while oil prices were high, new projects are in the pipeline and supply growth remains suppressed. However job cuts and reduced investment is expected to result in further rental decline in the second half of 2016." 



  • Total office stock reached approximately 3.5 million sq m GLA with the completion of ADNOC HQ on the Corniche and Bloom Central on Airport Road. Approximately 145,000 sq m GLA is expected to enter the market by the end of 2016 including ADIB HQ on Airport Road and Leaf Tower on Reem Island.
  • Average Grade A rents decreased by 3% to reach AED 1,795 / sq m from AED 1,850 / sq m. Average Grade B rents also decreased by 3% to reach AED 1,086 / sq m from AED 1,120 / sq m.
  • The overall vacancy rate increased marginally due to limited new speculative supply (with ADNOC HQ being owner occupied) and due to a slight increase in vacancy in some buildings, including a number of Grade A properties.
  • The office market has been the most negatively affected by the decline in oil prices and government spending. Oil revenues are a key driver of the economy and office market – comprising half of Abu Dhabi's GDP. There are increasing signs of oil companies reducing their office requirements and relinquishing space.
  • Indirectly, low oil prices have led to spending cuts in the government sector (with some government entities also reducing their office space) and a reduction in spending affecting other sectors.
  • Current office requirements are limited and this is expected to continue due to the reduction in government spending. Supply however remains under control, and Grade A vacancy rates remain low, offsetting the negative impact of reduced demand.

David Dudley commented "Demand for office space has reduced due to the decline in oil prices directly impacting the oil related sector and indirectly impacting other sectors due to a slow-down in government spending. There is increasing evidence of oil companies and government entities reducing headcount and office space requirements." 

He added "While we expect market-wide vacancy rates to increase in the current period of weaker demand, Grade A vacancy remains relatively low and therefore we expect Grade A rents to be broadly upheld".


  • Only 400 units were delivered during Q2, bringing the total residential stock to approximately 246,400 units. Deliveries include Bloom Central Apartments on Airport Road, Nalaya Villas on Reem Island and residential buildings within Danet and Rawdhat.
  • Approximately 4,000 units are expected to enter the market by the end of 2016 mainly within Reem Island, Rawdhat and Saraya, although based on past trends a proportion of these could experience delays at handover. 
  • Average prime rents for 2 bedroom apartments decreased nominally by 2% to reach 160,000 p.a from 163,000 p.a. due to a slight increase in vacancy rates caused by job cuts and people choosing to downsize.
  • Average prime sales prices have declined by 5% to reach approximately AED 15,200 / sq m from AED 16,000 / sq m, affected by the reduction in transaction volumes over the past year.
  • ADNOC announced that is planning to cut 5,000 jobs by the end of the year (of which 2,000 have already occurred). This, combined with further job cuts in the government and other sectors is leading to a decline in population growth – comprising Abu Dhabi's workforce and their dependents.
  • The new 3% municipality fee on Abu Dhabi expat rentals combined with the previous removal of fuel and water subsidies continues to impact cost of living. Additionally, a reduction in employment allowances and benefits is further contributing to a reduction in disposable incomes leading to some residents looking to downsize.
  • While vacancy rates increased slightly during Q2, the prevailing economic conditions are expected to have a more dramatic impact on residential rental demand during Q3 – as expats with families leave at the end of the academic year or choose to downsize as their tenancies expire.

David Dudley commented: "During Q2 2016 we have seen a nominal decrease in rents of about 2%. While there are signs of vacancy rates starting to increase slightly, many landlords are still able to maintain the same rental levels – with tenants often accepting this to avoid the additional costs and hassle of moving. However we expect vacancy rates to increase during Q3, causing further rental declines in the second half of the year."

He added "It is important to put this in perspective. Average prime rents in Abu Dhabi increased at 17% in 2013, at 11% in 2014, and at 5% in 2015 representing a 33% aggregate increase from 2013 to 2015. While we expect rents to decline further from the second half of the year, this is likely to be a relatively modest decline compared to the growth that occurred from 2013 to 2015 – we are not anticipating a major fall."

Commenting on the residential sales market he said "Over recent years, prime residential prices went up at 25% per annum which was unsustainable. As the market softened during 2015, prices have remained stable but transaction volumes have dropped significantly which is starting to put pressure on sales prices. While we expect this pressure to continue we also do not anticipate a sharp fall in prices."


  • No major completions took place during Q2 2016, maintaining retail stock at approximately 2.6 million sq m GLA. Approximately 59,000 sq m of retail GLA is expected to be delivered by the end of 2016, primarily within mixed-use schemes.
  • Thereafter, large malls are scheduled for completion in 2018 – notably Al Maryah Central Mall and Reem Mall amongst others.
  • Average line store rents within well-located malls on Abu Dhabi Island remained stable at AED 3,000 per sq m p.a. Average line store rents within malls off Abu Dhabi Island also remained stable at AED 1,860 per sq m p.a. (off Island).
  • In spite of a continued decline in retail spending, vacancies remain minimal within established regional and super-regional malls.
  • There are signs of a short-term decline in retail spending due to the overall economic climate of job cuts, a reduction in personal incomes and allowances, and a reduction in corporate hospitality demand. While rents have remained stable, mall operators are increasing leasing incentives to maintain and attract retailers.
  • The longer term prospects for the retail sector remain strong with high levels of disposable income in the residential population and year-on-year increases to tourism as Abu Dhabi's leisure offering continues to improve. This provides the potential for upgrading of the retail sector, with newer high grade shopping centres superseding outdated stock.

David Dudley commented "While significant retail space is set to enter the market from 2018, the development pipeline has reduced and demand growth remains positive from the spending power or the local population and continued tourism growth. The new malls, building on the success of Yas Mall will lead to a continual upgrading of this sector. With greater competition, we expect the market to polarise with lower quality malls needing to be re-positioned. In the meantime, retail rents are expected to remain stable."


  • The main addition to the Abu Dhabi hospitality market was the Four Seasons at Al Maryah Island, commencing its soft opening in May.
  • Around 2,200 rooms are expected to enter the market by the end of the year, with a significant share coming from large projects such as the Millennium Bab Al Qasr (677 keys) and the Fairmont Marina (over 800 keys of hotel and serviced apartments). Other planned completions include the Grand Hyatt, Gloria Downtown and Marriott hotels. Hotel room supply is expected to reach almost 26,000 rooms by the end of 2019.
  • While tourism growth continues, Abu Dhabi's hospitality market continues to rely heavily on corporate demand – which has suffered over recent months due to the decline in oil prices and resultant impact on government spending. With increased supply and a decline in corporate demand, hotel room rates have been declining, reaching historical lows in YT May ADR at USD 133. Overall, YT May RevPAR stands around USD 102, 12% below 2015 levels.
  • While room rates have declined, occupancy rates have been more stable and remain similar to their YT May levels in 2014 and 2015 (77%).
  • The medium term outlook remains positive driven by wide-ranging government initiatives to increase tourism including the expansion of the International Airport and Etihad Airways, further improvement of Abu Dhabi's leisure offering, the hosting of world-class events and major campaigns by ADTCA to promote Abu Dhabi internationally.

​David Dudley commented "The outlook for the hospitality sector remains positive. Amidst general spending cuts there is increased evidence of continued government continuing to invest in mega tourism projects, particularly on the flagship Yas and Saadiyat Islands."

Abu Dhabi Prime Rental Clock

This diagram illustrates where JLL estimates each prime market is within its individual rental cycle at the end of the relevant quarter.