The momentum experienced by the construction sector in Abu Dhabi has created a wide offer base for all kinds of properties. According to American real estate firm JLL, at the moment, the office, residential, and retail submarkets are fully supplied and experiencing slight to moderate declines in prices for both rent and purchase, which leaves potential investors and newcomers with bargaining power to negotiate rates. The hospitality sector is registering increases in occupancy rates following intensification of tourism arrivals.
The Abu Dhabi office real estate market is moving toward consolidation. A set of mergers and joining measures by government entities and financial institutions has relieved the demand for office supply, creating a downward tendency in prices. n the case of Grade-A space, the price as of 2Q2018 stands at AED1,700 per sqm, a decline of 3.5% compared to last year. Grade-B space has seen a sharper decline of 12.6% yearly, with current prices at AED900 per sqm on average.
This tendency has also been caused by a considerable increase in office supply. By the end of 2018, 170,000sqm of office gross leasable area (GLA) is expected to have entered the market, which means an increase in supply of 4.8% compared to 2017. Major constructions such as Omega Tower, ADIB HQ on Airport Road, Leaf Tower, Wafra Commercial Building, and United Square are contributing to this supply increase. The growth rate of supply for office space is expected to reduce significantly in 2019, with an estimated addition to the market of 50,000sqm.
There have been two trends shaping the retail sector recently. On one side, the introduction of VAT in the UAE has made retailers focus on offering greater value to shoppers, who have become more price sensitive. On the other side, as e-commerce gains ground in the country, the demand for retail space is becoming more storage-centered. The only delivery over 2018 in Abu Dhabi expanding retail space offering has been Leaf Tower on Reem Island. With other multi-purpose deliveries expected by the end of 2018, the market will see an increase of 62,000sqm of GLA, while 20,000sqm are expected to enter the market in 2019.
Some projects in the pipeline are expected to increase supply of retail space in the medium term. These include plans for expansion at Marina Mall, Reem Mall, and City Centre Al Jazeera.
The UAE government’s decision to allow 10-year visas for foreigners as well as 100% foreign ownership in companies has brought more security to expats living in the country, which will serve as a boost for demand of residential real estate in the next few years. 2018 is expected to see a total additional creation of supply in Abu Dhabi of 3,000 units, adding up to 255,000 residential units in total by the end of the year. Over 2019, 7,000 additional residential units are expected to enter the market.
2017 saw a breaking record year with 4.88 million visitors to the Emirate. Prospects for 2018 indicate that the number should reach 6 million.
The total room stock in Abu Dhabi will reach 22,400 rooms by the end of 2018 with the addition of 600 rooms resulting from the completion of Grand Hyatt Abu Dhabi Hotel & Residences, Rotana Saadiyat Beach Hotel, and Edition Al Bateen Harbour Hotel, among others.
According to Department Culture and Tourism-Abu Dhabi, the average occupancy rate of hotels in the Emirate stood at 74% over 2017. Data from January to May 2018 registered an increase of 1.4% compared to the same period of last year. The average daily rate (ADR) at Abu Dhabi’s hotels over the January-May 2018 period stood at USD114, which is a 7% decrease compared to 2017. This fall in price is mostly due to the creation of additional hotel room supply.