Value Added Tax (VAT) has put a lot of pressure on UAE residents.
Some sectors are not in the least worried, and one example of this is the commercial property sector in Abu Dhabi.
Has the commercial sector been affected by VAT?
The launch of VAT in the UAE has had little effect on the existing commercial tenants in Abu Dhabi, according to the report.
Knight Frank’s Q1 2018 Abu Dhabi Commercial Market Review said that this is also likely to be the case going forward in the UAE capital’s office market.
But the commercial sector isn’t looking for offices.
Low demand, more supply!
Office demand remained low resulting in a 2% average quarter-on-quarter drop in rental rates.
No major office buildings were delivered in the first quarter.
The Omega Towers on Al Reem Island and the ADIB HQ on Airport Road are due for handover before the end of the 2018 (195,000 square meters), but only around 70,000 sqm of these are likely to be brought to market with the remainder being delayed to 2019.
The delivery of additional supply at a time of weak demand as well as ongoing corporate consolidations are expected to place further downward pressure on rents over the next 12 months, particularly within secondary buildings i.e., not in prime locations.
Prime office rents in the first quarter of 2018 registered at around $500 on average (sqm per annum), down 1.6% from the first quarter of 2017.