Today Landmark Advisory, one of the leading real estate consultancy companies in the Middle East, released its July Leasing Guide for Abu Dhabi. Compiled in collaboration with LLJ Property, a leading real estate agency in Abu Dhabi, the latest report looks at the current trends for apartments, villas and commercial property in the Capital.
Landmark Advisory predicts that rents will continue to reduce as more residential and commercial projects are completed and delivered in the capital: "While asking prices for rents are not likely to decrease significantly in the coming months, we expect agreed rents to decline further as more landlords will be increasingly willing to negotiate, thus increasing the bid-ask spread, especially in the commercial market," said Ms. Jesse Downs, Director of Research & Advisory Services, Landmark Advisory.
In the commercial sector, office rents have declined by 10% since March 2010 and now average at AED 1,700 per square meter. This is in addition to the initial 10% decline registered by Landmark Advisory during the first two months of the year.
The areas in Abu Dhabi that witnessed the biggest declines were the City Centre and Tourist Club areas with rents falling up to 20%. Contrary to the general market trend, these areas experienced the biggest rent declines for low quality units. Other areas to witness significant rent declines were Khalidiyah and Corniche, where prices decreased by 10%-15%.
"Activity slowed down considerably in the commercial market during the last month as companies are now waiting for the handover of higher quality supply at more competitive lease rates. This trend is likely to continue as we enter the summer months which historically experiences low volumes," commented LLJ Property's Leasing Manager, Ms. Andrea Menown.
Looking to apartments, the latest report has found that rents have continued on a negative trajectory with an average additional decline of 9% since March 2010. Since the beginning of 2010, rents have already declined in average 15%. "During the first quarter of 2010, the lowest quality units experienced the largest rent declines," explained Ms Downs. "However, the mid- and high-end segments declined as much as 7% during the second quarter. This is significant as these segments have traditionally been more resilient.
Ms. Menown added: "This is primarily because the lowest quality units have already experienced a significant rent correction, while the mid- and high-end segments have remained relatively sheltered. Additionally, the mid- and high-end segment has seen more competition from new, higher quality supply entering the market in 2010."
Location-wise, apartments in Khalidiyah, City Centre and Al Bateen experienced the highest declines, ranging between 9% and 14%.
In terms of villas, rents in the villa segment continue to adjust; since March, average rents declined an additional 9% on the back of a 5% decline during the first quarter of 2010.
Al Khalidiyah and Off-Island quality units experienced the highest rent declines of 16% and 18% respectively: "High quality units in Abu Dhabi are suffering due to their initial inflated rates; these units are now in competition with high quality units in Dubai available at an attractive discount," explained Ms. Downs. "Moreover, the competition will only increase as new supply is handed over in Abu Dhabi."
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