Real Estate & Construction

Abu Dhabi’s Real Estate Sector

Real Estate

Abu Dhabi continues to invest in infrastructure to lay the groundwork for sustainable economic momentum, while residential, retail, and recreational offerings complement prime office space.

HOME SWEET HOME

Government investments into infrastructure and the broadening of Abu Dhabi’s economic matrix continue to heavily drive demand for real estate. The residential sales market is also enjoying growth as the Emirate develops its reputation as an investment destination and safe haven in the region.

The government is also offering a helping hand to help people get on the property ladder and boost construction. The Emirate’s Executive Council has signed off on residential loans and infrastructure schemes valued at AED15.8 billion ($4.31 billion), where AED3.1 billion has been earmarked for housing loans to over 1,500 Emirati families.

In 3Q2013, residential stock in Abu Dhabi roughly rose by 2,700 units, with price growth in the residential sales market of 5%, having risen by a similar figure in 2Q2013, according to Jones Lang LaSalle’s 3Q2013 market report. Also according to the report, the prime end of the market posted the strongest recovery as rents managed to remain stable at AED130,000 per annum for a two-bedroom apartment, and AED170,000 for a three-bedroom villa. As of 3Q2013, the Emirate’s residential stock amounted to 213,000 units with prime developments, such as the Landmark Tower and Saadiyat Beach Residences expansion, as well as state housing schemes set to expand the number to 41,000 units by end-2015, with aggregate supply topping at 254,000 units mostly comprising the property of master-planned areas like Reem and Saadiyat Islands. Residential units saw a rough 70:30 split between apartments and villas, respectively. Meanwhile, over this period, apartments were being sold at an average of AED14,200 per sqm.

According to Masood Al Awar, CEO of Tasweek, “We are still in a period of recovery, but are basically now in a better position, as the Abu Dhabi government has announced that it would fund AED330 billion over the next five years.” In a word of caution, Director of Business Development at LLJ Property, Jane Irvine, notes that, “A true real estate market is driven by supply and demand. The regulators have tried discussing restrictions on mortgages, but if the speculators come back in the market then they don’t need mortgages.”

THE DESK JOB

Abu Dhabi is getting ready for a likely influx of new office workers as Abu Dhabi Global Market (ADGM), the new financial free zone, opens for business. Foreign financial entities will likely see the appeal of having neighbors including sovereign wealth fund the Abu Dhabi Investment Authority, and state investment fund Mubadala, nearby. Of course, this all cries out for somewhere to stand the water cooler. As of 3Q2013, the Abu Dhabi office stock (vacancy rate 38%) was at 2.95 million sqm, which is forecast rising by 967,000 sqm to around 3.9 million sqm by end-2015. The vacancy rate has made for a stable rental environment for both A and B Grade property over 2013 at an average of AED1,540 and AED1,200 per sqm per annum, respectively. Grade A property rents remained a huge 59% down on peak values observed in 2008. Yet Grade A units dominated demand for the year, which should ensure a widening performance gap between primary and secondary office buildings.

SHOPPING FOR SPACE

Abu Dhabi’s total retail property stock is insufficient, especially at the quality end, and various developments—new malls or expansions of old ones—are underway to remedy this. Total retail space across the Emirate as of 3Q2013 was at roughly 1.89 million sqm. Retail stock grew approximately 112,000 sqm in for the period with new offerings including The Galleria at Sowwah Square on Al Maryah Island, The Collection at the St. Regis on Saadiyat Island and Deerfields Town Square in Bahia. Banu Taş is the General Manager of the latter project, a five-floor mall of 80,000 sqm of retail with 180 retailers, ranking it among Abu Dhabi’s top 10. She confirmed that “retail tourism is recognized as one of the main means of increasing the number of visitors to the city in the government’s Vision 2030.” A further 143,000 sqm of retail space is estimated to have been added over 2H2013, with the World Trade Centre Mall at the Central Market in Abu Dhabi city, and Capital Mall, in Building Materials City at Mussafah being noteworthy. According to Jones Lang LaSalle, by end-2015, Abu Dhabi’s overall retail space is estimated to have reached 2.6 million sqm of gross leasable area (GLA) with the arrival of such projects as Yas Mall, Saadiyat Mall, Sowwah Central, and Reem Mall.

ROOM WITH A VIEW

The Tourism Development & Investment Company (TDIC) is the state-owned master developer spearheading the Emirate’s goal of becoming a global tourism destination. Among the projects it has initiated are international showpieces such as the Guggenheim and Louvre museums. Add shopping, beaches, and retail, and the Emirate becomes a major international attraction. Indeed, tourist arrivals in Abu Dhabi are thought to have reached 1.7 million in 2013, with visitors from London alone reportedly spending close to $200 million. Naturally, the growing portfolio of high-end attractions and tourist offerings requires bed capacity. According to Jones Lang LaSalle figures, by end-2015, overall supply is likely to reach 23,100 rooms, for average growth of 15% in yearly terms from the 2013 level of 17,350. As of 3Q2013, Abu Dhabi’s hotel occupancy rate had recovered to 64%, from an average of 58% in 2012, compensating for a small reduction of 2% in the average daily rate (ADR) over the previous 12 months. In 3Q2013, 300 additional rooms were added to the Emirate’s stock when St. Regis Abu Dhabi opened for business on the Corniche. Roughly 1,700 rooms were added in 9M2013. Also appearing in 3Q2013 was the 88 hotel apartment Eastern Mangroves Suites. Between the time of writing and the end of 2015, an estimated further 5,700 beds are due to be added to Abu Dhabi’s inventory.

CITYSCAPE ABU DHABI 2014

In its seventh year in 2013, Abu Dhabi’s premier real estate investment and development exhibition, Cityscape Abu Dhabi, showcased 120 exhibitors from 68 countries to over 15,000 visitors. Cityscape is a must for all those involved in the Emirate’s construction and real estate markets, from developers, contractors, and planners, to environmentalists, and many buyers and sellers.