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Abu Dhabi on the upswing

View of Abu Dhabi Skyline at sunset

After having experienced continuous growth over the past two years, positive sentiment prevails in the UAE capital’s real estate market, despite historically low oil prices.

April 2015

With Cityscape Abu Dhabi 2015 just around the corner, we take a look back at the performance of Abu Dhabi’s real estate market over the past 12 months and speak to experts about what to expect for the remainder of the year.

The overall sentiment is that although low oil prices have softened investor sentiment, the underlying fundamentals of the Abu Dhabi market remain strong as the government remains committed to the 2030 Vision and continues with significant infrastructure spending.


Mat Green, Head of Research and Consultancy UAE, CBRE Middle East says that at the start of last year, the removal of the rent cap had an immediate impact on the market and CBRE observed a significant growth in residential rents as a result. Today, 15 months into the new system, the market has normalised to a point at which CBRE haven’t seen the same levels of rental inflation as were observed at the beginning of last year.

David Dudley, Regional Director, Abu Dhabi, JLL, agrees saying that the residential rental market has softened however JLL expect rental growth to continue, albeit at a reduced rate due to the expected slowdown in government spending.

“We expect this to be a slowdown in annual growth rather than the government putting the brakes on – we still expect employment creation and residential demand growth to be sustained from projects commenced while the oil price was high, albeit at a slower pace.  Given a current shortage of quality housing, we expect rental growth to continue, but at single-digit growth rates, rather than the double-digit rates we saw from 2013 to 2014,” Dudley says.

CBRE on the other hand expect rental prices to remain relatively stable for the remainder of the year. “There is not a huge amount of supply entering the market in the emirate in 2015. Good quality locations will still see slight rental growth but overall we expect a quite stable year when compared to 2014,” Mat Green says.


While the residential rental market is linked to the overall supply–demand balance, the sales market is driven more by sentiment and consequently is more sensitive to the recent decline in oil prices and equities markets, JLL’s Dudley explains.

“Annual sales growth rates have been at higher levels than rental growth rates over the last two years – at 25% annual price growth for prime, high quality units during 2013 and 2014 (compared to 11-17% growth of prime residential rents).

“The residential sales market witnessed rapid growth from Q1 2013 to Q4 2014 due to positive investor sentiment (confidence in Abu Dhabi’s economic growth combined the UAE’s safe haven status to regional investors) and increased demand from end users (greater levels of job security and purchaser appetite post downturn),” Dudley says.

Following this quarterly growth, prime average residential sales prices remained stable during Q4 2014 and JLL expect them to remain stable during 2015.  “However we do not anticipate a significant decline in prime residential prices due to the relative shortage of availability of quality product,” Dudley adds.


In Abu Dhabi, large-scale office demand is dominated by government entities and state-owned enterprises, many of which are owner occupiers that are not in the market for renting or purchasing speculative office space and consequently vacancy rates remain high, Dudley explains.

The JLL experts adds that private sector requirements tend to be small scale, although there are indications that occupier demand has increased based on number and size of tenant requirements, leading to increased market absorption and reduced vacancy.

“In spite of this, Abu Dhabi’s office market is now back in recovery with rental growth occurring in high quality, well-managed office buildings driven by recent market absorption, increasing occupier requirements and a reduction in annual completions of speculative supply.

“The future growth of the office market is very much dependent on government economic development initiatives to grow new demand and increase private sector activity – particularly within the free zones,” Dudley says.

Looking at Abu Dhabi’s Financial Free Zone on Al Maryah Island, CBRE believe that the lack of clarity around the zone is responsible for the fact that the office sector hasn’t seen much movement over the past 12 months.  “The lack of clarity around the legal framework and structure of the Financial Free Zone leaves potential tenants looking to lease into that market in uncertainty,” Mat Green says.

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