Office Landlords in Abu Dhabi Are Becoming Increasingly Flexible on Rents

Office landlords in Abu Dhabi are becoming increasingly flexible on rents as values continue to decline in the UAE capital, according to real estate consultancy Knight Frank.

Greater rent free periods are among incentives being offered to secure long term leases as prime rents fell by more than 6 percent in the first quarter of 2019 compared to the same period last year.

Matthew Dadd, partner at Knight Frank Middle East, Occupier Services and Commercial Agency said, “Given current market conditions, landlords are increasingly becoming more flexible, where they are willing to offer greater rent free periods amongst other incentives to secure long term leases. Looking ahead, we believe demand will stem from government initiatives and growth in the hydrocarbon sector.”

Knight Franks said average prime rents registered at AED1,685 per sq m per year, a 6.1 percent decline when compared to the same quarter a year earlier.

It added that the decline in Grade A rents looks to have moderated in Q1 with the rents falling by 2.1 percent over the year to March.

In the first quarter of 2019, Knight Frank data also showed that 82 percent of space demanded was for floor areas below 500 square metres, up marginally from 79 percent six months earlier.

Knight Frank said that the office market remains subdued despite Abu Dhabi’s economy returning to growth in 2018, with GDP increasing by 1.9 percent, up from the 0.9 percent contraction witnessed a year earlier.

This growth has primarily been driven by the oil sector which grew by 3.4 percent, up from the 2.9 percent contraction in 2017. However, the non-oil sector’s growth has slowed marginally to 0.6 percent in 2018 from 0.9 percent in 2017.

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