Prime retail developments in Abu Dhabi, UAE, continued to display stability in both rental and occupancy rates during the second quarter (Q2) of the year, according to a report released by global real estate consultancy firm CBRE.

All major malls in the capital have maintained high occupancy, in excess of 95 per cent - with the retail sector having achieved considerable growth over the past five years, driven by the local population and growing tourist numbers, said the Q2 2016 Abu Dhabi MarketView.

However, according to the recently published Abu Dhabi Economic Performance Report from the Department of Economic Development, domestic and external economic challenges have impacted consumer confidence, prompting retail operators to put their business investments and expansion plans on hold in the short term.

Prime office rentals remained flat

According to the Q2 Abu Dhabi MarketView, the average prime office rentals remained flat at Dh1,800 ($490) per sq m per year, although, landlords are starting to offer tenants more flexibility with their leasing and payment terms as they strive to maintain and build tenant loyalty in order to uphold occupancy rates.

Commercial activities proved to be significantly weaker than in previous quarters, with the subdued business environment reflecting the quieter economic climate. The secondary market witnessed a further 2 per cent drop quarter-on-quarter, maintaining its downward trend.

Mat Green, head of Research & Consulting UAE, CBRE Middle East, said: “The office sector witnessed low occupier demands in Q1 and has reflected a similar reoccurrence in the performance during Q2.”

Residential one better performing sectors

The MarketView states that, although there has been a reoccurrence of economic uncertainty, the residential sector has been expected to remain one of the capital’s better performing sectors, aided by the low levels of upcoming supply in the short term. The shift in dynamic has emerged amidst ongoing downsizing across multiple industry sectors, which has resulted in weaker demand, specifically for high-end apartment products.

More affordable units remain in demand, reflecting the demographic of the vast majority of expatriate workers. Rental rates for affordable units have remained steady with minimal fluctuation recorded against the general slowdown observed in the upper segments.

“With a growing number of new projects in the long-term pipeline, we expect to see an upward trajectory in annual supply in the coming years, with the bulk majority belonging to properties oriented towards the upper-mid to high-end segments,” said Green.

Seasonality in tourism market

According to the MarketView, the second quarter has proven to be more of a challenging period for the capital’s hotel properties for the hospitality market, with Ramadan coinciding with the end of the normal season, culminating in weaker than normal tourism performance.

Overall occupancy rates remained flat in May 2016, according to data from STR Global, both the average daily rate (ADR) and revenue per available room (RevPar) posted a 12 per cent drop from the same period last year.

“The downward trend in performance reflected the combined adverse effects of increasing hotel competition, US dollar strength and an overall slowdown in tourism growth,” said Green.

ADRs fell from Dh555/room/night in May 2015 to around Dh490/room/night in May 2016. During the same year, RevPar dropped by Dh51. – TradeArabia News Service