Fresh supply of residential apartments sees softening of Abu Dhabi rents

The Abu Dhabi Report for Q2 2009 issued today by Asteco, the UAE's largest property services company, showed that the capital was finally seeing a shift in the market, with the buyers and tenants being able to dictate their terms when selecting their property. Due to the increased choices in residential units, tenants could now negotiate more favorable terms with landlords.

"In Abu Dhabi, tenant demand for quality residential units continues to increase, though at a slower pace. However, this scenario is in line with regional trends. Demand for rental property is still high but tenants have been able to take advantage of the increasing number of choices to negotiate better deals and more affordable homes."

said Andrew Chambers, Asteco's Managing Director.

An interesting development of the latest findings was that landlords were becoming increasingly flexible and were dropping rental rates in line with existing market demand. Some were even willing to accept two or more cheques instead of one.

Tenants showed a marked preference for newly built units, with apartment complexes offering facilities such as health clubs and swimming pools in greater demand. With the decline in villa rental rates outside of the main city, tenants were also exploring the possibility of shifting to reasonably priced villas from their apartment homes in the city.

As a result of villas offering more space, better finish and guaranteed parking, tenants were more inclined to take up units at more flexible prices, with three-bedroom villas seeing a surge in demand while rents for five-bedroom villas continuing to decline.

Additionally, villas in Al Reef, Al Raha Gardens and Sas Al Nakheel continued to be in demand. The majority of the villas at Al Raha Gardens have been completed but are being released in smaller lots, thereby preventing an over-supply.

Beginning this year, Abu Dhabi started witnessing an improvement in supply with an increase in availability of residential apartments due to tenants moving out of the country. In the second quarter, residential apartments in Khalidiya and Corniche continued to command a premium.

However, rents for apartments and offices in the Tourist Club Area (TCA) are reporting a decline due to the shortage of adequate parking areas, the traffic congestion and the ongoing road development projects.

In terms of commercial rentals, Abu Dhabi continued to witness a strong demand for Grade A office units while new office towers offering shell and core units are struggling to find tenants as cautious companies do not want to incur additional costs for fit-out. As a result, companies prefer to occupy smaller offices or to trade their current location in favour of one with lower rent.

Office rents are expected to see a further decline during the summer and the upcoming Ramadan periods as companies adopt a wait-and-watch attitude before deciding to rent their preferred space. The decrease in rental rates has affected mainly Grade B and Grade C offices, with Hamdan Street, Khalidiyah and Airport Road experiencing a drop of 19%, 15% and 13% respectively.

In Al Ain, the residential villa market showed signs of stability during the second quarter. Al Towaya continued to command the highest rents for villas. There was a marginal change from the previous quarter.

Apartment rents in Al Ain did not fluctuate much during the first half of the year. Tenants continued to favour busy neighbourhoods such as Al Jimi and the Town Centre.

Compiled and updated quarterly since 2006, Asteco's research reports include the survey and compilation of residential and commercial rental analysis for each emirate of the UAE.

Founded in Dubai in 1985, Asteco is the UAE's largest property services company. Its services include retail, commercial and residential sales and leasing; strategic consultancy; property management and marketing; feasibility studies and valuations; and research and investment.