Market confidence in Abu Dhabi is considerably high in the wake of a favourable economic environment, a revival in tourism numbers, a successful vaccine programme, and the recent scaling back of Covid-19 restrictions, according to Cushman & Wakefield Core’s latest Abu Dhabi Annual Report 2022.
However, most price recovery was witnessed over the last 12-18 months, with the market expected to be in a steady phase over 2022.
The head of Abu Dhabi at Cushman & Wakefield Core, David Short, said: “Continued inward investment with key investment deals and the announcement of full foreign ownership for specific businesses affirms the government’s push to attract more direct foreign investments by promoting an open and flexible business environment and bolstering Abu Dhabi’s position on the global investment map.”
Abu Dhabi’s residential real estate market
Residential supply
A total of 6,000 residential units were delivered in 2021 and approximately 7,000 units are expected to be delivered in 2022, according to the report.
Most of the supply in 2021 was delivered on Al Reem Island, Yas Island, and Al Raha Beach areas.
David Short added: “The villa market in Abu Dhabi remains relatively undersupplied with limited new deliveries expected in 2022. Prominent apartment projects expected in 2022 are mainly concentrated on Al Reem Island.”
Residential sales
Due to a large number of handovers on Al Reem Island, there is a relative oversupply of apartments. However, it remains a preferred apartment district witnessing strong off-plan sales and a growing leisure hub with the expected delivery of Al Reem Mall in 2022.
Saadiyat Island remains the most popular prime villa district witnessing the highest year-on-year price rises due to its beach-front lifestyle, premium stock, and nearness to a range of amenities.
David Short said: ‘While Covid-19 led lifestyle changes and need for larger spaces have helped villa district performance, most recovery happened during Q3-Q4 2020, with city-wide sales prices remaining relatively flat with just a 2% year-on-year rise for both villas and apartment districts.”
Residential rentals
The report highlighted that the rental market also gained upward momentum in 2021, with citywide villa rentals witnessing a marginal 1% year-on-year rise.
Although an improvement in performance compared to sharper drops in previous years, city-wide apartment rents saw a 2% decline due to a relative oversupply.
David Short said: “While the shift for villas continues, competitively priced apartments remained popular in central locations.
“Select new projects with superior built properties on Al Reem Island and in Al Raha Beach, although being offered at above-average market rents, are achieving strong absorption.”
He added: “While the recovery is gradual, improvements in rental rates recorded in 2021 are expected to continue in 2022.”
Residential forecast for 2022
- Continued success for off-plan residential sales, especially in the prime segment of Al Reem, Saadiyat and Yas Island.
- Occupier preference for larger living spaces to remain, with villa sales and rentals expected to show marginal increases
- Demand for Al Reem Island apartment sales and the rental market is expected to improve due to the upcoming Al Reem Mall. Handover of apartments forecast over 2022 may result in slight downward pressure on apartment rents
Abu Dhabi’s office real estate market
As the flight to quality over 2020 and 2021 improved occupancy levels in Grade A offices, headline rents also witnessed a slight increase.
However, these high occupancy rates and steady headline rents are now pricing out a majority of occupiers who remain cost-conscious.
David Short said: “With the majority of the workforce having now returned to the office and renewed business confidence, demand for office space is increasing across building grades.”
Flexibility continues to be key with serviced offices remaining popular for start-ups and new market entrants.
Demand for flexible offices in branded serviced offices has led to existing operators looking to expand and tenants favouring the flexibility of shorter lease term commitments.
Short added: “We are witnessing that Headline rents are still a key driver, with a preference for fitted and furnished space as tenants are unwilling to commit to full CAPEX for shell and core or CAT A space.”
The Abu Dhabi office market continues to see segmented office market performance with occupancy levels increasing in Grade A offices from 75% to 79% and rents rising by 5 % due to limited supply and a move to flight to quality during 2020-2021.
Furthermore, Grade B properties are growing in popularity due to their value proposition and availability of fitted options, while Grade C occupancies continue to decline.
Office market forecast for 2022
- Fitted offices will continue to drive office demand
- Grade A rents are expected to remain stable due to limited supply and Grade B rents to stabilise as most fitted spaces are absorbed. Rental levels in Grade C to see further downward movement
- Parking remains an issue and will be a key decision driver within the downtown area as most occupiers have returned to the workplace
Abu Dhabi’s industrial real estate market
The industrial and warehousing sector continues to see robust performance with COVID-19-led E-commerce growth along with a renewed focus on manufacturing is driving demand in Abu Dhabi.
Mussafah and ICAD continue to be the most popular warehousing areas, but quality supply remains a challenge, with many occupiers considering relocating or expanding in Al Markaz and KIZAD.
The new stock within KIZAD (non-freezone) is expected to provide support with nearly 250,000 square metres of international grade stock expected to be delivered in Q3 2022.
With competitive rentals, and building specifications matching tenant requirements, it is expected to see strong take-up.
David Short said: “The pandemic gave new impetus to e-commerce and logistics sectors in Abu Dhabi with a surge in demand for last-mile deliveries and temperature-controlled warehousing.
“The concept of dark stores is gaining popularity with many dark store operators looking to increase market presence in Abu Dhabi with an average inquiry ranging from 200-400 square metres.”
Industrial market forecast for 2022
- Demand from E-commerce and manufacturing to continue underpinning warehousing demand in Abu Dhabi in the mid-term
- As supply becomes limited, upcoming areas such as Al Markaz and KIZAD (non-freezone), where new quality supply is expected to come to market, are expected to see the most leasing activity