© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
April 18, 2011 5:05 pm
The price of living and working in Abu Dhabi is gradually becoming more competitive with neighbouring emirates and countries as new office space becomes available and the city’s housing costs continue to slide.
Average residential rents have fallen 40 per cent in Abu Dhabi since the market’s peak in 2008, say analysts with Jones Lang LaSalle, the consultancy.
The estimated 16,000 new homes scheduled to come on to the market this year – double the number of 2010 – will drive rents down further, although not enough to meet local demand for middle-income housing.
“Rents will fall, but it makes Abu Dhabi more competitive with the rest of the region and internationally,” says David Dudley, the head of Jones Lang LaSalle’s Abu Dhabi office.
High housing prices, particularly in 2008, were “a real concern” for companies weighing the costs of placing new employees in Abu Dhabi, says Matthew Green, a researcher with CB Richard Ellis, the property group.
“Now that we’ve seen rents come off [their peak], some of that consideration is less prominent,” he says.
In Dubai, a relatively ample supply of residential property relative to demand has kept prices much lower than in Abu Dhabi and pushed thousands of office workers to make the
90-minute daily commute between the two emirates, says Mark Morris Jones, a director with CB Richard Ellis.
While the relative vibrancy of Dubai is likely to maintain its attraction for many of those commuters, analysts estimate that falling prices and the improving quality of homes will gradually draw some back to Abu Dhabi.
Because of a lack of supply in Abu Dhabi, says Mr Morris Jones, “the premium to being in central Abu Dhabi is equivalent to being in a high-end apartment.
“You have a pretty rubbish-quality product which is letting at astronomical prices,” he adds.
New office space, such as the development of Sowwah Square, the first phase of which is expected to be completed this year, is also likely to help Abu Dhabi lure new companies while reducing the rent that developers can command.
Jones Lang LaSalle estimates that new commercial developments will bring more than 300,000 sq m of high-quality office space to the market this year.
“[Abu Dhabi’s] going to be able to compete more with Dubai, which has had that quality office space for a while,” says Mr Green.
Yet falling prices and new developments are not expected to fulfil the city’s growing need for middle-income housing.
The museums, including the Louvre Abu Dhabi, being built on Saadiyat Island, aim to establish a local arts community, and an expanded industrial zone will bring in more office workers as the city attempts to diversify its economy away from government employment and the oil and gas industry.
The government has said that new developments must include some affordable housing offered on long-term leases.
Developers say that this new policy, and the shift of the market’s focus from property investors to residents themselves, means the demand for reasonably priced housing is more prominent than before.
“From that perspective, there is an opportunity and a need for it,” says Sami Asad, the chief executive of Aldar, the property developer.
“You focus on the actual need of the market and you move accordingly.”
Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.