Abu Dhabi’s office and industrial markets are showing signs of growth, with a rebound in rents already underway, according to global real estate consultancy, Knight Frank.

 

Office rents in three out of the six prime office submarkets monitored by Knight Frank experienced growth ranging from 3.5% to 12% during 2022. 

 

This turn around is attributed to the rebound in economic growth and the increase in employment levels, it stated.

 

Faisal Durrani, the Partner and Head of Middle East Research, Knight Frank, said: "While Abu Dhabi’s office market has been slower to recover from the pandemic when compared to neighbouring Dubai, rapid economic expansion – estimated at 8.8% last year – has significantly contributed the change in the fortunes of the office market."

 

"This, combined with an uplift in job creation rates has started to filter through in the form of new office demand," he stated.

 

"Indeed, our teams have recorded 344,900 sq ft of new office demand in Abu Dhabi last year – an increase of 5% on 2021, with the banking and finance sector (20%) accounting for the bulk of new requirements," he added.

 

According to Knight Frank, the employment data from Oxford Economics which estimates employment to have reached 1.29 million at the end of last year. 

 

While this figure is still shy of pre-pandemic levels, by the end of 2023, 1.32 million people are expected to be working in the capital, eclipsing pre-pandemic levels, it stated.

 

David Crook, Partner – Head of Abu Dhabi, Knight Frank, said: "The most critical factor in supporting rental growth is the severe shortage of prime Grade A office space. This is of course a double-edged sword – a lack of supply is to an extent holding back true demand, with occupiers willing to settle for older stock in more secondary locations."

 

"With just 275,000 sqft of new office stock expected over the next two years, the upward pressure on best-in-class rents is likely to persist, particularly as occupancy levels in the city’s best buildings is hovering at, or above 95%," he noted.

 

Knight Frank pointed out that the picture in Abu Dhabi’s industrial market was more stable, with warehouse rents in the six main markets remaining unchanged during 2022.

 

Rates in Abu Dhabi Airport Free Zone (AED 550 per sq m) are still the most expensive in the city. Even though ADAFZ leased more space in 2022 than it did in 2021, rents remain stable, primarily because vacancy levels remain stubbornly high.

 

Other industrial areas in Abu Dhabi such as Kezad did not experience any change in rents as demand remains steady.

 

Crook said: "The industrial sector is rapidly emerging as a core pillar in Abu Dhabi’s economic diversification strategy and the last 18-24 months has seen a raft of new occupiers establishing large-scale facilities at Kezad, while existing occupiers are expanding their footprints."

 

Knight Frank points to various authorities’ initiatives, such as the Smart Manufacturing Index which is helping industrial occupiers reduce their operational and efficiency gaps, in addition to positioning Abu Dhabi as a key industrial and manufacturing hub in the region.

 

"In Abu Dhabi, a key pillar of demand is materialising in the form of banking and finance, and education occupiers – in fact together, these two sectors accounted for 39% of the total level of new requirements we recorded last year," he added.-TradeArabia News Service