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Marhaba!
Abu Dhabi, the United Arab Emirate’s capital city, has plenty to offer
| Text : Elizabeth Kerr | Photo : www.thinkstockphotos.com |
Once thought of as the Emirates’ second city, Abu Dhabi has, in recent years, blossomed into a cosmopolitan business centre in its own right on top of being the seat of the United Arab Emirate’s government. But Abu Dhabi has a wealth of its own charms and advantages, charming enough in fact to be the story (if not shooting) location for Sex and the City 2. It’s infinitely more cultural than the more famous Dubai, and it’s the country’s economic engine, regardless of what Dubai’s crane-dotted landscape may indicate. Lest we forget, it was Abu Dhabi that bailed Dubai out of its economic quagmire.
Abu Dhabi is actually an island that stretches out into the Persian Gulf. It’s well known for it’s oil wealth and natural gas production, but there’s been an active move toward diversifying the economy of late. To whit, financial services, tourism and real estate development are among the city’s key industries. The population is young, affluent and majority expatriate and it is a massively popular choice for foreign investors with almost $1 trillion in overseas capital in the city. The mix of people living and working in Abu Dhabi has given it a tolerant vibe that rivals Jordan, it has remained free of bad press (neighbouring Sharjah has been uttered in the same sentence as illegal arms dealer Viktor Bout) and the city contributes upwards of 60 percent of the UAE’s revenue.
“The property market in Abu Dhabi is going through a transitional period as subdued end-user demand and a weaker economic climate impacts upon both leasing and transactional activity across all real estate classes,” begins Richard Foulds, Senior Director and Head of Abu Dhabi & Director of Leasing at CB Richard Ellis Middle East. “The driving force for future growth seems to lie very much within the commercial market and the completion and handover of new Grade A office assets from 2011 onwards.”
What he refers to as a constrained office market has limited business growth in the capital, but that’s starting to change. “As new developments complete over the next year, and companies are forced out of their commercial villas, a shift in the core market dynamic is expected. A major pick-up in leasing activity is forecast over the next 12 to 18 months as company movement increases exponentially,” Foulds explains.
In an attempt to keep up with global building trends, the Department of Municipal Affairs has also introduced “green” measures for new buildings as well as complementing fire, safety and security requirements. Unlike Hong Kong, which is suffering a dearth of premium office space, Abu Dhabi is starting to get into multinational swing of things and increasingly has something to show for it. CBRE’s MarketView states, “The commercial sector in Abu Dhabi is slowly shifting from a supply-constrained environment with limited quality product, to a market with rising stock levels and improving specifications.” Rising vacancies, new supply, and sliding rental rates gave the first half of 2010 a market favourable to tenants. Prices are dropping in the office sector, and prime rates now sit at less than 50 percent of their 2008 peak.
But doing business in Abu Dhabi, at least from an infrastructure perspective, is looking up despite falling office rental rates. “Some prime commercial product continues to be set apart from other offerings in the market, with superior specifications and facilities allowing significantly higher rental rates to be set. The Al Sowwah Square development has already attracted considerable interest from high profile domestic and international occupiers, raising the number of prelets secured at rates around AED3,000 (HK$6,300) per square metre per year. This exceptional rate within a difficult market environment positively reflects not just the quality of the space and the overall development but also the increasing demand for Grade A accommodation in the market at present,” said the CBRE report. That said, new projects coming onto the office market over the next year and a half, including International Tower in the city centre beside from the National Exhibition Centre, could impact those premium rates. Regardless, Abu Dhabi’s maturing office market remains one of the most expensive in the world.
In the residential sector, things are looking up too. “The luxury residential market in region has really been led by neighbouring Dubai, where a seemingly endless conveyor belt of glamorous and glitzy projects have caught the public attention and that of investors. Although slightly more restrained in its product offering to date, Abu Dhabi has also witnessed a significant expansion of the luxury residential sector,” says Foulds. Developers like Aldar, Sorouh and Mubadala are beginning to offer up product that would hold up to any European or North American standards. Also getting involved are the hotel brands, providing the expected branded residences.
Abu Dhabi could be facing some challenging price drops across the board in the property market stemming wobbly global economics and slow investment activity, but it nonetheless could be a strong investment choice ahead of Dubai. As Foulds sees it, “Dubai is a slightly more mature market, with its underlying property laws and regulations a little further developed … Abu Dhabi, although severely impacted during the crisis, does not yet have the same level of vacant property to drag the market down further, and with expectations of a more solid economic recovery over the next three years it seems to be pretty well positioned for future growth and expansion of sector and an opportunity for long term commercial investors.” Marhaba indeed.
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