Abu Dhabi landlords cut rents to avoid vacancies
Weakness in the job market and reduced housing allowances exerted downward pressure on both villa and apartments rents and sales prices in Abu Dhabi in the third quarter of 2017, says real estate consultancy Asteco.
“We are experiencing a weak labour market with reduced employment opportunities and a tightening of housing allowances. This, together with additional supply since 2016 has led to increased vacancy rates which we expect to continue into 2018. Landlords are discounting rents and offering flexible payment terms [up to 12 cheques] to retain existing tenants and secure new leases,” said John Stevens, managing director, Asteco.
Approximately 2,750 apartments have been completed across Abu Dhabi since the beginning of 2017, compared with 1,350 for 2016. In addition to the 800 units delivered in Q3, a further 1,500 apartments are due to handover before the end of 2017, estimates Asteco.
Landlords are discounting rents and offering flexible payment terms [up to 12 cheques] to retain existing tenants and secure new leases John Stevens, managing director, Asteco
Apartment rents dropped by three per cent over the quarter and by 10 per cent over the last 12 months, with the highest declines recorded for mid-end properties and large units within prime and high-end projects.
In the high-end segment, the highest year-on-year (Yoy) declines were recorded at Abu Dhabi Corniche (down 15 per cent), while mid-end and low-end areas also evidenced large declines, including Al Reef Downtown, Khalifa and MBZ City.
Sales prices for apartments declined three per cent quarter on quarter (Qoq) and 10 per cent Yoy.
The most significant Yoy declines in sales price were recorded in Al Muneera and Reef Downtown, both down 12 per cent, with the highest Qoq declines reported in City of Lights, down eight per cent, and Sun & Sky Towers, down six per cent. Both Al Bandar and Saadiyat Beach Residence were unchanged for the quarter.
Villas get cheaper
Villa rents decreased by three per cent Qoq and by six per cent Yoy. Al Raha Gardens, Hydra Village and the larger units within Saadiyat Beach Villas recorded a more pronounced drop, with rents softening by seven per cent, four per cent and five per cent respectively.
The highest Yoy decline in villa sales was recorded in Hydra Village, at nine per cent, with Qoq results showing a decline of three per cent, the same as Raha Gardens.
Only a small number of villas were delivered in 2016. However, approximately 550 villas have been completed in 2017 and a further 250 villas are due for delivery before the end of Q4.
Stevens said: “Rising vacancy rates have been experienced in many villa communities as tenants opted to downsize to smaller or more affordable properties, while some even transitioned to apartments to reduce their accommodation expenses.”
He added: “Despite a marginal decrease in sales prices for completed villas, demand for prime and high-end off-plan projects, particularly those located on Yas Island and Saadiyat Islands, remained strong.”
How office market fared
Similar trends echoed throughout the office market due to a subdued economy, despite a modest recovery in the oil price since the start of the year. Office accommodation is evidencing low occupancy rates with approximately 170,000sqm of office space having been delivered over 2016 and 2017.
Stevens said: “Office rents were broadly unchanged over the quarter. However, evidence indicates declines of five per cent to 10 per cent on contract renewals within several Grade A and B office buildings. Landlords have actively sought to reconfigure accommodation into smaller units and offer rent-free incentives to retain existing tenants and secure new tenants.”
— business@khaleejtimes.com