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Office Occupier activity in Abu Dhabi remains subdued since COVID-19

As a result of the economic fallout caused by the COVID-19 pandemic, Abu Dhabi’s GDP is expected to fall by 7.2% in 2020

Market activity has been centred around consolidation of space or as a cost saving measure, or a combination of both Abu Dhabi is set to push ahead with approved projects and even fast-track certain expenditures On average, Citywide office rents across Abu Dhabi fell 8.0% in the year to Q2 2020

By Knight Frank ME

The Abu Dhabi Office Market Update for Q2 2020, released by Knight Frank Middle East shows that, occupier activity in Abu Dhabi has remained relatively subdued since the onset of the COVID-19 pandemic, a trend which is expected to continue over the coming quarter.

 Taimur Khan, Associate Partner, commented: “Where there has been market activity, it has been centred around consolidation of space or as a cost saving measure, or a combination of both. Despite limited occupier activity, there has been very little movement in headline rents, however, incentives to retain occupiers and attract new tenants are abundant.”

 Economic Update

Initial estimates show that Abu Dhabi’s GDP grew by 1.9% in 2019, up from 1.2% in 2018. As a result of the economic fallout caused by the COVID-19 pandemic, Abu Dhabi’s GDP is expected to fall by 7.2% in 2020. Whilst economic growth is expected to return in 2021, where GDP is forecast to register a growth rate of 5.1%, Abu Dhabi’s economy will only return to its 2019 GDP level by 2022.

 Employment in Abu Dhabi is estimated to have increased by 2.7% in 2019. As economic activity contracts, so will employment, where in 2020 total employment is expected to decline by 5.4%.

 Taimur Khan added: “Despite the economic headwinds the capital faces, the Abu Dhabi Government and its related entities are set to push ahead with approved projects and even fast-track certain expenditures as part of the Ghadan 21 stimulus package. As a result, employment is expected to return to its 2019 level by 2021.”

 

Office Market Update

As at Q2 2020, average Prime rents across Abu Dhabi were recorded at AED 1,640/sq.m, average Grade A rents at AED 1,203/sq.m and average Citywide rents at AED 946/sq.m.

On average, Citywide office rents across Abu Dhabi fell 8.0% in the year to Q2 2020, whilst Prime and Grade A rents fell by 0.3% and 3.0% respectively over the same period.

 Market wide vacancy in Abu Dhabi’s office market registered at 22.1% as at Q2 2020, down from 22.8% a quarter earlier. Over a 12-month period to Q2 2020, vacancy in Grade A and Citywide stock has increased by 4.8 and 4.3 percentage points respectively, whereas Prime vacancy has fallen by 10.3 percentage points over the same period.

 Currently there are estimated to be 37 active office projects within Abu Dhabi, with delivery dates up to 2024, which are either being executed or in the study or design phase. The total value of these projects currently is estimated at $982m.

 Read the report here.