Abu Dhabi’s economic expansion across key sectors such as aviation, education, and healthcare, coupled with the continued growth of the hydrocarbon industry is driving increased demand for office and industrial space in the emirate, according to the Winter 2014 Abu Dhabi Commercial Market Outlook by leading real estate consultancy Cluttons.

According to the report, top tier rents in Abu Dhabi’s office market have held steady once more this quarter, with Grade A and super prime space continuing to command a high level of interest from a wide range of opportunistic occupiers, who view the current rates of circa Dh1,850 ($504) per sq m to Dh2,000 ($544) per sq m as “fair value”.

The report reveals that most Grade A schemes are operating at close to full occupancy. With the supply pipeline for new top tier schemes still relatively weak, occupiers have been left with no option but to look at other segments of the market. This strong demand is being transferred to the secondary and tertiary markets, pockets of which have recorded an upward creep in rents for the first time in 18 months.

Cluttons’ international research and business development manager Faisal Durrani said: “This strong demand for Grade A space is filtering through to other segments of the market, and this is driving the emergence of a two tiered secondary and tertiary market. We expect this trend to gather pace, with a widening gap in rents in these developing segments of the office market.”

“This is already being reflected in asking rents. During Q3, rents for secondary space increased by eight per cent to Dh1,300 ($353.8) per sq m, while tertiary rents climbed to Dh900 ($245) per sq m, which translates into a 13 per cent increase on the second quarter of the year.

“The emergence of this two tiered market has been caused by the presence of secondary and tertiary stock in prime areas of Abu Dhabi, such as Khalifa Street, Electra Street and Khalidiya Street, where Grade A space remains limited. The schemes recording this upward creep in rents include those which provide adequate parking provisions, offer reliable property management services, and are well maintained,” he added.

Industrial

Cluttons’ latest report highlights the continued growth of Khalifa Port at Khalifa Industrial Zone Abu Dhabi, which has been fuelled in part by the Abu Dhabi Ports Company’s decision to gradually divert cargo and container traffic away from Zayed Port, to the north of Abu Dhabi to make way for a cruise terminal.

Steve Morgan, chief executive of Cluttons Middle East, said: “With Kizad and Khalifa Port both expanding in tandem and complementing one another, Abu Dhabi’s vision of creating an integrated logistics hub is gradually materialising and through further positive government encouragement, we expect to see occupier activity here grow exponentially over the next few years, driving up rents in parallel.”

As Kizad continues to mature, and positions itself as Abu Dhabi’s primary integrated industrial and logistics hub, a number of international occupiers are mobilising to establish a presence here. Most recently, UK-based Morgan Advanced Materials (MAM) announced the construction of its first dedicated Middle East factory in Kizad.

MAM has signed a 30-year lease agreement for its Dh50 million ($13.6 million)  facility that will be built on a 37,000-sq-m plot. The company specialises in the production of specialist industrial products designed for use primarily in the hydrocarbon sector.

“In line with the office market, the hydrocarbon sector, which remains intrinsically linked to the government of Abu Dhabi, is expected to drive a substantial amount of take up activity over the near to medium term,” Morgan said.

“With the UAE this month committing to the upscaling of its daily oil production by 25 per cent over the next three years, the vast majority of investment in hydrocarbon infrastructure is forecast to take place in Abu Dhabi, which is directly expected to boost hydrocarbon occupier activity in both the office and industrial markets,” he concluded. – TradeArabia News Service