Shortage of office space forces businesses into villas

The number of residential homes now being used for office space has grown by a third, official figures show.

An acute shortage of office space has forced many new businesses to use residential villas for commercial premises, property consultants and officials have said. The number of units used for commercial purposes in Abu Dhabi grew by 34 per cent over the past year, according to the Department of Planning and Economy. Demand for office space in Abu Dhabi is being driven by the booming local economy, but the conversion of residential units is putting further upwards pressure on house rents.

"A continual problem in the market is the lack of available stock," said Richard Foulds, director of leasing and development at CB Richard Ellis in Abu Dhabi. "Less than one per cent of offices are unoccupied and available for rent and these are not suitable for international occupiers due to the specification." According to the consultant's latest analysis of Abu Dhabi's office market during the third quarter 2008, average vacancy rates were very low and "in many instances, there was zero vacancy".

As a result, office rents have grown between 33 and 45 per cent in the last year, with typical 'prime rents' now standing between Dh2,800 (US$760) and Dh3,400 per square metre, the report found. [e-mail]