Rents in Abu Dhabi tell a tale of two cities as prices polarise

Rents for older flats and offices in Abu Dhabi's city centre are set to fall further as thousands of new homes and offices enter the market. Silvia Razgova / The National

Housing and office rents in central parts of Abu Dhabi are set to fall further this year as the capital's property market showed further signs of polarising.

The property consultancy CBRE estimates rents for older flats and offices in the city centre are set to fall further as thousands of new homes enter the market and the capital's office stock increases.

CBRE said that secondary office rents fell between 2 and 4 per cent during the three months to December to between Dh700 (US$190) and Dh1,250 per square metre a year while housing rents across the city fell by an average of 4 per cent during the quarter, driven by city centre declines.

The agent added that average rents are still anticipated to be subject to "further depreciation" during the first half of this year, "as a polarised market emerges".

It expects 45,000 new homes to be delivered across the city between 2013 and 2015, with Reem Island receiving the largest share.

Matthew Green, the head of research for CBRE's Middle Eastern division, said that rents for shops in secondary locations were also set to fall heavily as new shopping malls such as the Galleria on Sowwah Square and Yas Mall on Yas Island open their doors over the coming year.

"What we're seeing with Abu Dhabi is the same sort of polarisation we saw in Dubai between 12 and 18 months ago," Mr Green said.

"Landlords for all types of older stock in secondary locations will find it tougher to rent out any property which does not offer a certain level of facilities and landlords will have to look at other ways of occupying these buildings - either by dropping rents, refurbishing or redeveloping them."

CBRE predicted that vacant units in hard-hit areas would be filled by new chain convenience stores and restaurants attracted by falling rents.

However, for the newer developments of Abu Dhabi it was a different story.

CBRE said that rents rose for selected good quality assets in desirable locations, such as Al Raha Beach, Saadiyat Island and prime residential schemes along the Corniche and are set to increase further this year.

It said average sales rates for residential apartments targeted towards the upper middle and upmarket segments now range between Dh9,650 and Dh13,400 per square metre, with the higher price points observed for completed units within "Investment Zone" areas such as Al Raha Beach and Al Reem Island.

Prime office rents in the capital remained static during the three months to December at about Dh1,600 to Dh1,900 per square metre per year and are expected to remain flat this year.