Office rents in Abu Dhabi are coming under pressure as low oil prices force companies to cut back.
Rents for average top-class offices in Abu Dhabi fell 3 per cent in the second quarter of this year to Dh1,795 per square metre compared with the previous quarter, according to property broker JLL.
JLL found that grade-B office rents also fell 3 per cent during the three months to the end of June to Dh1,086 per sq metre as occupiers reduced requirements and relinquished space.
Prime office rents in Abu Dhabi remained flat over the period at Dh1,800 per sq metre, according to the data supplied by the broker CBRE, which also published its quarterly property figures today. However, it said that challenging market conditions meant that landlords were starting to offer tenants more flexibility with their leasing and payment terms.
“Demand for office space has reduced because of the decline in oil prices directly impacting the oil-related sector and indirectly impacting other sectors because of a slowdown in government spending,” said David Dudley, the head of JLL’s Abu Dhabi office.
“There is increasing evidence of oil companies and government entities reducing headcount and office space requirements.”
Both agents reported that retail rents in the capital remained stable as vacancy rates within Abu Dhabi’s major shopping malls remain low.
Average store rents in well-located malls on Abu Dhabi Island were steady at Dh3,000 per sq metre a year, while average store rents in off-island locations remained unchanged at Dh1,860 per sq metre.
Nevertheless, both agents reported that mall operators are increasing leasing incentives to maintain and attract retailers as consumer confidence diminishes in a climate of job cuts, a reduction in personal incomes and allowances, and a reduction in corporate hospitality demand.
CBRE reported that occupancy rates for major malls in Abu Dhabi stood at more than 95 per cent – something unlikely to change much until two major new malls are completed in 2018.
“In the short term, new retail supply in the capital is actually very limited, which should help insulate retailers and mall owners from the emergence of more severe negative impacts,” said Matthew Green, the head of research in CBRE’s Dubai office. “However, while oil prices remain low, we can expect to see consumer confidence also remaining below normal levels.”
Follow The National’s Business section on Twitter