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Abu Dhabi’s strong economic rebound and expansion in employment levels are pushing office rents upwards in the UAE capital, according to a new report.
Leasing rates for office space in three out of the six prime submarkets in the UAE capital registered increases of 3.5% to 12% during 2022, Knight Frank said on Monday.
The UAE capital is also seeing limited supply of office space, while occupancy levels in sought-after buildings are already hovering at, or above 95%.
The real estate consultancy said that more businesses are looking for space to rent in Abu Dhabi, citing that it recorded around 344,900 square feet (32,000 square metres) of new office demand last year, up by 5% from 2021. Tenants in the banking and finance sector accounted for the bulk of new requirements, around 20%.
Abu Dhabi’s office sector has been slower to recover from the impact of the health outbreak when compared to its neighbouring emirate of Dubai, but the recent rebound in economic growth has “contributed the change in the fortunes” of the market, according to Faisal Durrani, Partner – Head of Middle East Research at Knight Frank.
“This, combined with an uplift in job creation rates, has started to filter through in the form of new office demand,” Durrani said.
Positive trends
Abu Dhabi had a stellar performance last year compared to its peers across the Middle East and North Africa (MENA), with growth in its gross domestic product (GDP) reaching 10.5% during the first nine months of 2022, the highest in the region.
Quoting data from Oxford Economics, Knight Frank said that job numbers in the UAE capital reached 1.29 million at the end of last year.
The figure still lags pre-pandemic levels, but by the end of the year, around 1.32 million people are expected to be working in the capital, eclipsing the levels seen prior to the pandemic, it added.
“The most critical factor in supporting rental growth is the severe shortage of prime Grade A office space. This is of course a double-edged sword – a lack of supply is to an extent holding back true demand, with occupiers willing to settle for older stock in more secondary locations,” said David Crook, Partner – Head of Abu Dhabi, Knight Frank.
Abu Dhabi is expected to see new office stock of around 275,000 square feet over the next two years, while occupancy levels in the city’s best buildings is hovering at, or above 95%. With the limited supply, Crook said the upward pressure on rents is likely to persist, particularly for “best-in-class” properties.
(Reporting by Cleofe Maceda; editing by Seban Scaria )
