Real Estate & Construction

Looking to the Future

Abu Dhabi's real estate sector saw prices fall in 2016, but the government's long-term vision and the structural health of the industry have participants expecting big things in the future.

After more than a decade of strong growth, 2016 was an uneven year for the UAE’s real estate and construction sector. Falling oil prices led to decreased demand across the board, leading developers to shift their approaches to deal with the transformation of the market. Yet the lack of explosive growth doesn’t spell doom for the Abu Dhabi economy. Experienced industry participants know that the market operates in cycles, and, in interviews with TBY, a common refrain was the necessity during a slow year to bring prices down to earth and give the market a chance to readjust. Thanks to a forward-looking government and a reputation as one of the GCC’s real-estate hotspots, firms plan to continue working to develop Abu Dhabi for the years to come


Abu Dhabi faces a number of challenges unique to the UAE. The fall in oil prices hit Abu Dhabi hard and created spillover effects in the real estate market. Abu Dhabi’s GDP fell by 4.5% in 2016, and the real estate sector saw prices fall across the board. The residential real estate sector was perhaps the hardest hit, with research firm JLL reporting that average rents fell by 5% from 2016. Villa and apartment sales showed the largest decline, with prices falling 11% from the year before, but the damage was hardly limited to any one segment of the market: apartment rentals fell by 7% and villa rentals fell by 4%. After residential prices grew by 25% in 2013, the current downturn probably served to bring prices back down to more sustainable levels. As such, industry participants see the current conditions as an expected and perhaps needed cycle, and note that the current downturn has allowed for the refiguring needed for a more stable long-term sector.

The fall in oil revenues has resulted in increased demand for cheaper housing as the Abu Dhabi population adjusts to lower income levels. Participants in the Abu Dhabi real estate sector have recognized the potential of this new sector and have begun to offer new units targeting these middle- and low-income groups. Many participants see this as a positive sign, citing the traditional lack of good low-income housing options in Abu Dhabi and noting that this could lay the foundation for a more stable crop of affordable housing in the future. Chris Taylor, CEO of Abu Dhabi Finance (ADF), said as much in an interview with TBY. “Ownership has now been made available for lower-income people,” Taylor told TBY, “and this is very healthy for the market. The chances for developers to make money amid lower prices will also push them to offer better services, to raise their standards, and to push for a more effective sector.”

Similar trends were at play in Abu Dhabi’s office sector, which saw average rents drop 5% YoY due to the oil sector’s decline and a drop in public spending. Commercial lending leaders noted that the current trend in the industry was consolidation and increased efficiency of space, with demand for subdivided and affordable units far outpacing demand for luxury office complexes. Despite the flagging demand, which is expected to persist through 2017, the office retail market remains fairly strong due to the lack of new units appearing on the market. JLL projects that some 211,000sqm of office space will arrive on the market in 2017. The limited amount of space available should help keep rents from bottoming out while the oil market continues to slow.
Likewise, Abu Dhabi’s retail market remained stable in 2016. No major arrivals came to market, and rents remained stable. A few minor projects are expected to add about 85,000sqm of retail space in 2017, but the Emirate’s status as a destination shopping area is expected to keep demand strong in major malls despite job and spending cuts that will reduce discretionary income. Abu Dhabi’s flagship retail project is the USD1 billion Al Marayah Central shopping mall, which is expected to provide a boost to the retail sector when it opens in 2018. Located on Al Maryah island, the project will be 2.8 million sqft upon completion. Developer Gulf Related has already leased about half that space, with an estimated 75% expected to be leased by the end of summer 2017. Retailers already committed to the site include Zara, Al Tyer, and Chalhoub.

What else could the future hold? Some industry participants believe that Abu Dhabi needs to emulate Dubai and create additional free zones. Currently, Dubai is home to 25 free zones, development sites that come with streamlined regulation and tax incentives in order to draw concentrated retail and commercial real estate. The lower operating costs and efficiencies of scale have made Dubai’s free trade zones popular areas for retail clustering, and the positive effects of such zones have served as buffers against retail downturns. Foreign investment and private partnerships, while not as widespread in Abu Dhabi as in Dubai, are still cornerstones of the economy and an increase in these zones is one possibility for the future.


Abu Dhabi’s construction sector has slowed considerably after the boom of recent years. The current projects in the sector reflect the demands for more affordable and low-budget housing and office space. Larger-scale infrastructure and flagship building contracts, in contrast, have slowed as public spending has dipped. As with real estate demand, developers regard this as a natural cycle for the market and are hardly concerned. Sami Sidawi, Chairman of Al Nasr Contracting Company, told TBY as much in a recent interview: “The market has been going through an interesting spiral of ups and downs and we see it as a matter of survival of the fittest. The most competitive companies have been able to overcome this period while others have perished in the process; at the end, this will generate a healthier market with only quality players operating in it. We believe that by end-2017 this restructuration process will finish and we will see a revamp in the market. I see a bright long-term future for the UAE.”

Nevertheless, there are significant projects underway. 2016 saw the Bloom Central and ADNOC HQ projects finish on Abu Dhabi island, and the arrival of Four Seasons and Marriott hotels, which added more than 500 rooms to the city’s hotel supply. The Abu Dhabi government has also continued work on Plan 2030, an ambitious long-term blueprint for the development of a sustainable, well-managed Emirate. Launched in 2030, the plan consists of a set of guiding principles for the present and future needs of the Emirate that will help the city grow in a manageable and structured way. Part of the plan calls for the development of a new Madinat Zayed business district, and 2016 saw the government award a AED1 billion construction package for the development of the site. The project includes a host of infrastructure works to integrate the district into Abu Dhabi’s public transportation system and link to the surrounding districts of Khalifa and Mohammed Bin Zayed. Upon completion, the new multi-use urban center is expected to house 300,000 people and be the workplace of an additional 300,000.

There are also a number of large-scale construction projects underway in the Emirate that were set in motion before the fall in oil prices. Several have come under delays in recent years due to the decrease in revenues, but their continuation and planned completion are expected in the next few years. Most of these projects are infrastructure upgrades, like the new Midfield Airport Terminal, a USD3.5 billion program that will double the airport’s capacity to 30 million passengers a year upon its completion in early 2019. Abu Dhabi is also constructing Barakah Nuclear Power Plant, the first nuclear plant in the UAE. Eventually expected to supply a quarter of the UAE’s electricity needs, the USD23 billion project will have four reactors when fully operational in 2020. As part of the infrastructure of the plant, Abu Dhabi is also constructing the USD1.5 billion E11 highway, which will connect the Emirate with the Saudi border. Plan 2030 includes more than infrastructure construction, though. Commercial developments such as the 36,000sqm community market project planned for Mohamed bin Zayed City and the USD440 million Rahayel City auto hub are examples of new construction sites that are designed to diversify the Abu Dhabi economy through new commercial options.

The long-term nature of these projects has given the construction industry confidence and purpose heading in to the future. Eng. Hamad Al Amer, Managing Director of Trojan Holding, summed up the general sentiment when he told TBY that “We are trying to align our company’s vision with Abu Dhabi Vision 2030…. The recent downturn caused by sluggish commodity prices and a surplus of oil in the global market impacted every sector. Nevertheless, in 2017 we see prices going back to normal with a market recovery on the horizon.”