Abu Dhabi worker relocations boost real estate

0
1631
Spread the love

An Abu Dhabi government requirement for public sector workers to reside in Abu Dhabi, provides a boost to the capital’s real estate sector.

  • The real estate market is already benefiting from the Executive Council of Abu Dhabi’s planned five year investment of AED 330 bn
  • The rising level of housing demand is evidenced by a significant 13.2% rise in average capital values for apartments during H1 2013
  • Average price increases for high end apartments on Reem Island stood at 15.9% during H1 2013, more than double the overall growth rate recorded across the capital
  • New mega malls are expected to act as anchors for future residential and commercial development, mirroring those in Dubai
saadiyat island abu dhabi real estate
Sadiyaat Island in Abu Dhabi. The capital’s real estate market witnessed a rise in demand due to worker relocation, says real estate company Cluttons.

The impact of the Executive Council of Abu Dhabi planned AED 330 billion financial injection into the Emirate’s economy over the next five years has been designed to stimulate economic growth and to promote economic diversification. It is expected to act as a catalyst not only for growth within the Emirate, but the broader UAE as well as the nation’s FDI appeal is now expected to rise. The Q1 Business Cycle released by the Department of Economic Development reflects this upturn with a rise in the number of new business licenses issued and an increase in the number of people employed across the capital.

The residential sector is seeing a boost in demand through the government’s requirement for Abu Dhabi public sector staff to relocate to the capital by today, 1 September 2013. In response to the ruling, Steven Morgan, the Head of Cluttons Middle East commented:

Steven Morgan; “This requirement has certainly contributed to the rising tenant demand that we have been recording. We expect that the ruling, which comes into force today for 20,000 public sector workers and their families, will continue to place downward pressure on vacancy levels. At the same time, this will bolster residential rental and capital value growth rates, particularly in submarkets that provide easy access to Abu Dhabi Island and the lifestyle offered by Dubai.

Al Raha Beach is a prime example of this, and we have already seen rents rise by close to 15 percent during the second quarter. This rise has been fueled in part by tenants wishing to secure suitable accommodation ahead of today’s deadline and also by new job starters moving to the capital, particularly in the education, healthcare and hospitality sectors.” — Steven Morgan, Head of Cluttons Middle East

The aforementioned upturn in employment, coupled with the government’s relocation requirement is expected to continue to reduce the oversupply of residential stock and push up prices.  Rising levels of housing demand have already been evidenced by a 13.2 percent rise in average capital values for apartments in the first half of 2013. Furthermore, increases of 15.9 percent in average prices for high-end apartments on Reem Island during H1 were also recorded; this is more than double the overall 7.3 percent growth rate across the capital over the same period.

This is in marked contrast to last year, when high-end apartment values contract by -3.3 percent on Reem Island, while apartment prices slipped by -4.4 percent across Abu Dhabi.  Villas have registered capital value rises of 22 percent during H1, underpinned by the strong performance of submarkets such as Sadiyat Island.  Al Reef Villas emerged as the strongest performing villa submarket in the six months to June, registering strong growth of 15.1 percent, due to its family appeal and desirable location, adjacent to Sheikh Zayed Rd.

The office market on the other hand, remains subdued. However, whilst office supply continues to lag occupier demand, prime grade-A rents are holding steady at between AED 1,700 and AED 1,800 per sq. mt., while more secondary offices, in locations perceived to be inferior, are still experiencing rent reductions, dipping to just below AED 1,000 per sq. mt.

It is office space in older parts of the capital that are likely to experience ongoing downward rental adjustment as more modern office space challenges older buildings.  With no boost to office demand levels expected in the near future, it is unlikely that a turnaround in office rental growth rates will be recorded this year.

The retail scene in the capital offers a more positive outlook, with a circa 200,000 sq. mt. still expected to come online this year at Deerfields Mall, Emporium Mall at the Central Market and the recently opened Galleria Mall at Sowwah Square.  With 600,000 sq. mt. of additional retail space projected to come to market from 2014 to 2017, we expect the malls in the capital to follow a similar strategy to those in Dubai, acting as anchors for future residential and commercial development.  Malls such as Dubai Mall (Downtown Dubai) and Mall of the Emirates (Barsha) have been the catalysts for housing,and office demand in their respective submarkets and Abu Dhabi’s new mega malls are likely to act as the foundation blocks for similar future growth.

Photo: Sadiyaat Islands

Facebook Comments