Market confidence in Abu Dhabi has considerably increased 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 Real Estate’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.
David Short, head of Abu Dhabi at Cushman & Wakefield Core, 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 residential market
A total of 6,000 residential units were delivered in 2021 and approximately 7,000 units are expected to be delivered in 2022. Most of the supply in 2021 was delivered to Al Reem Island, Yas Island and Al Raha Beach areas.
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.”
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.
The report highlights: “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.”
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.”
Abu Dhabi office 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.
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 detailed: “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.
Abu Dhabi industrial 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.
“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 200-400m2,” Short explained.
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 (non-free zone).
The new stock within KIZAD (non-free zone) is expected to provide support with nearly 250,000 sq.m. 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.