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Office space in Abu Dhabi

Office space in Abu Dhabi

Although the emirate’s commercial property market is going through a tough phase, it will stabilize itself in the long-term future, says Matthew Green.

April 16, 2009 8:14 by

Global markets around the world have been unraveling at an alarming pace and although Abu Dhabi is not immune to the wider slowdown, it seems to be better positioned than the majority.  Some of the key dynamics helping to underpin the market include: historic undersupply, pent-up demand, large budget surpluses, significant investment in infrastructure and diversification of the economy.

All these factors have helped form a robust market which is supported by real demand for property that has created a sound platform for growth and sustainability even in the face of tough market conditions.

Comparisons with Dubai

Although many comparisons can be drawn between the office market of Abu Dhabi and Dubai, some major variances also exist.  This is becoming increasingly apparent as conditions deteriorate in both local and global markets.  Dubai is seeing rents and prices decline significantly as occupier demand evaporates.  This situation is likely to be further compounded by the handover of over 13 million sq ft of office space within the next two years, a figure that alone is greater than the total office stock in Abu Dhabi City.  It seems while Dubai is heading towards a significant oversupply situation, Abu Dhabi will remain chronically undersupplied, at least in the short-term.  Importantly the majority of current stock in Abu Dhabi is also concentrated within aging buildings that largely fail to provide an international standard of product to occupiers.  This situation in itself offers opportunities for landlords to target tenants or for occupiers to bargain better terms within current premises. Currently there is only 2 million sq ft of Grade A office buildings based on international standards. Whilst, only 14 percent of the upcoming commercial developments are expected to be of Grade A quality by 2011.

The Abu Dhabi government has taken decisive measures to support the controlled expansion of the emirate. This was realised in the form of the Abu Dhabi Plan 2030 which provides a framework for the overall metropolitan expansion, valid for the next 20 years.  To realise the scale of planned development, Abu Dhabi is expected to inject over AED700 billion in various infrastructure projects within the next five years.

Abu Dhabi has suffered widespread undersupply across virtually all market sectors over recent years with major infrastructure projects necessary before many developments could begin.  While the pace of development in Dubai has been mind-blowing at times, Abu Dhabi has been more methodical and planned in its approach.  Historically, there has been very little development of dedicated office buildings in Abu Dhabi, other than for owner occupation. This has obviously led to undersupply as the emirate struggled to keep pace with the population boom in the UAE.  This is beginning to change as the market has been inundated with requests from international companies potentially entering the Abu Dhabi market, and looking for Grade ‘A’ level quality office space.

Despite the pressing economic turmoil being experienced globally, Abu Dhabi continues to push ahead with some of the regions most ambitious and anticipated projects, a positive indication of the emirates’ financial health.  The majority of these ventures are directly linked to Abu Dhabi’s drive to boost it’s stature as a world class tourism and business destination as part of its wider economic diversification strategy.  Unsurprisingly then it is the quasi-government ventures that remain the most active in the market and this trend is expected to continue as private sector involvement suffers.

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