A historic review and outlook of Abu Dhabi’s Real Estate sector from 2008 to 2016 Abu Dhabi Real Estate Report Q4 2016 Content 03 06 10 12 14 Abu Dhabi Abu Dhabi Al Ain Al Ain About Asteco Historic Review Rental Rates Historic Review Rental Rates and Outlook and Outlook Sales Prices Property Map 2016 Highlights 2016 Highlights Property Map 2017 Outlook 2017 Outlook 2 Abu Dhabi Real Estate Report - Q4 2016 Abu Dhabi Historic Review and Outlook Growth Recession Recovery and Growth Stabilisation Slowdown 2002-2008 2009-2011 2012-2014 2015 2016 • As a consequence of rapidly • The global financial crisis led to a rapid • The market began to show signs of • Limited new supply saw rental rates • Bearish market sentiment coupled growing demand coupled with correction in prices, which dropped in recovery with a significant increase in and sales price increase at a moderate with downsizing in various sectors an undersupplied market, rental excess of 60% from their market peak rental and sales rates. pace in 2015, especially in the first half had a marked effect on demand for rates and sales prices achieved in Q4 2008 to a market low by the end of the year. Rates remained broadly residential and office space. unprecedented growth until the end of 2011. • Several new prime and high-end stable in the latter half on the back of of 2008. projects were handed over during a drop in oil prices, which prompted a • As a result, negative growth was • With only approximately 8,000 new this period, including projects on general slowdown in investment. recorded for the first time in three • Most of Abu Dhabi’s buildings were of units entering the market over the Reem Island, Al Raha Beach as well as years. mid and low quality with residential three-year period, supply levels landmark projects on Saadiyat Island • By the end of 2015, the residential ABU DHABI and commercial properties grossly were still insufficient to cater to and Abu Dhabi Main Island. market comprised approximately • Residential rental rates decreased by undersupplied. demand, which led to a slower but still 234,000 units whilst office supply 7% and 5% for apartments and villas, substantial rental decline compared • With quality residential units now stood at 3.3 million square metres of respectively. • Increased demand prompted the available at relatively low prices, rates with neighbouring Dubai. As a result, Gross Leasable Area (GLA). • Although sales transaction levels and launch of numerous development a large number of Residents were for inferior quality stock with relatively projects as well as a speculator driven high prices corrected. • The flight-to-quality situation prices experienced a decline, some priced out and forced to move to newly launched projects offering boom. cheaper communities in Dubai. continued to put pressure on mature • Internal Tenant movement and flight- and inferior quality properties. competitive sales rates and payment • With strong economic performance, • The first Master Planned to-quality prevailed as people took plans have recorded positive demand the number of newcomers to the city developments were handed over advantage of the options available. • Sales demand focused on completed levels. increased quickly putting pressure rather than off-plan products. during this period, most notably Al • The number of Owner-occupiers • Several mergers were announced on residential rates and pricing out a Bandar and Al Zeina at Al Raha Beach. large number of Residents. gradually rose in line with the increase • In the Leasing market, prime and high in 2016, including the National Bank • The drop in rental rates resulted in a in finance options offered by banks. quality residential projects were the of Abu Dhabi with First Gulf Bank, • Office demand was equally strong strong Leasing market and led to an most sought after developments in sovereign wealth funds Mubadala with and many companies were unable to • Transaction levels were up as job 2015 achieving close to full occupancy. International Petroleum Investment internal Tenant movement of flight- security and increased market expand due to the lack of available to-quality. Co. and oil and gas companies Zakum space. confidence resulted in tenancy Development Company (ZADCO) • As rental rates decreased and quality upgrades and home ownership. with the Abu Dhabi Marine Operating • Strong interest and slow delivery new supply entered the market, Company (ADMA-OPCO). of new commercial units led to • Off-plan sales also recommenced and transaction levels in Abu Dhabi were successful during 2013 and 2014. unprecedented levels of rental and picked up leading to a take-up of new • In December 2016, the Department sales price inflation. residential supply in well planned • Sales prices recorded a quick recovery of Municipal Affairs and Transport announced the reintroduction of the • Overall, rental rates and sales prices projects. of approximately 28% compared with their lowest point. rent cap, which limits rent increases reached a historical peak for all unit • Whilst sales transaction levels were to 5% per year for existing Tenants. types and grades in 2008. generally low during this period, • The office market was relatively stable Although the need for such a law is • Several projects were launched and demand increased slowly by the with lower quality office space showing debatable in the short term, as rents sold off-plan at increasing prices. By end of 2011 as projects began the marginal declines while superior units are expected to soften further, the the end of 2008, following the financial handover stage. recorded slight increases. application is likely to be welcomed crisis, the resale market for off-plan in the long term as it will provide • However, with the amount of stock additional protection to Tenants. properties came to a virtual standstill. available, sales prices continued to decline. • A housing fee of 3% of the annual rent for expatriates was also introduced in 2016. © Asteco Property Management, 2017 3 Abu Dhabi The Abu Dhabi Real Estate market witnessed a general slowdown across all sectors as rental rates and sales prices decreased throughout the Capital. Whilst rates for high-end developments remained relatively stable Supply completed 2016 Highlights over the last few years, job cuts and a reduction in staff allowances in 2016 had a negative effect on demand and rates. However, off-plan Residential projects with attractive sales prices and payment plans have witnessed positive demand. in 2016 Leasing Sales 1,350 apartments Apartments Apartments • Apartment rental rates decreased by 7%, on average, over the year • Sales prices decreased by 4%, on average, in 2016, with Reem Island as approximately 1,400 residential units were handed over during reporting an overall decline of 8%. 50 villas and highlights 2016, which led to increased competition with existing buildings. Residential • Transaction activity in 2016 was lower compared with previous years. town houses • Whist prime and high-end units declined by 6% and 9%, on average, This was mainly due to a limited amount of supply of completed units larger three and four bedroom units experienced drops of more than available for sale. A number of deals were achieved at below market 12% and saw a rise in vacancy levels. rates. • Despite a lack in demand, the existing Saadiyat Island projects fared • Sales prices for projects located at Al Raha Beach remained relatively 84,000 sq m well and recorded high rental rates and occupancy levels. stable throughout the year, although only few transactions were recorded. office space (BUA) • At the lower end of the market rental rates decreased by 5%, on average, primarily during the second half of the year. Villas ABU DHABI Villas • Villa sales prices were down by 4% compared with 2015, with a limited number of transactions for completed units. • Similar to apartments, villa rental rates declined by 5%, on average, in Selection of projects 2016 with the most notable decrease witnessed in the Al Raha Beach • However, demand for off-plan products was positive due to new area (10%). Mature villas, which previously recorded high rental projects available in the market at attractive price levels and rates, have been affected the most, which resulted in an increase in payment plans. completed in 2016 vacancy levels in some communities. • The new Saadiyat Lagoons District, launched by TDIC, recorded • Rental rates for villa units on Saadiyat Island remained relatively positive demand. The Developer released Phase One, which consists stable over the year, which was mainly due to a large percentage of of 820 townhouses, offered on a freehold basis to all nationalities. RESIDENTIAL properties being owned by the occupier. Prices started at AED 2.3 million (average sales rate of AED 1,180 per • Reem Island: Nalaya Villas – 42 villas square foot) for a three bedroom unit. • Reem Island: Wave Tower – 229 units • Nalaya Villas, a new development on Reem Island, was handed over • Reem Island: C21 and C22 – 364 units in 2016, offering three to five bedroom units from AED 320,000 to • Contrary to previous years, end-user demand for new units • Airport Road: Two Towers in Danet AED 450,000 per year. outweighed that of Investors. Abu Dhabi – 480 units • Corniche: Saraya Views - 122 units • Office rental rates decreased on average by 7%. COMMERCIAL • Asteco witnessed a notable slowdown in office take-up and upgrades, especially for larger space requirements. Office • Airport Road: Bloom Central offices • As a result, Landlords offered smaller units, lower rental rates and more flexible payment plans. and serviced apartments highlights • Corniche: ADNOC Headquarters • Demand for office buildings with limited parking was affected the most. This resulted in average rental rates of AED 700 to 1,000 per square metre (AED 65 to 93 per square foot), depending on size and lease terms, whereas units with sufficient parking ratios were available at a 25% premium.