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The latest quarterly report issued by MPM Properties, the real estate subsidiary of Abu Dhabi Islamic Bank (ADIB), shows that the real estate market in Abu Dhabi continues to see a stabilization of rental and sales prices for completed properties, while the off-plan sales market has witnessed increased activity with the majority of released units from key developers being sold on the launch day itself.
The report covers Abu Dhabi's residential, office, retail and hospitality sectors and includes the second update of ADIB’s Rental Index, which highlights the performance of its managed portfolio comprising over 12,000 residential units.
Residential sales prices and rental rates across the Investment Areas experienced modest growth (+5%) during the past 3 months, with the exception of Saadiyat Island which has seen rental increases of over 10% for some units.
Slowdown in new supply remains evident, with the phased release of apartments within Aldar’s Gate District on Reem Island and the last phase at Al Ghadeer being the main additions to the market during Q3.
The ADIB quarterly Rental Index, launched in August, shows a continuing trend across the portfolio of between 0 to +5% increase during Q3. , highlighting the fact that the market is self-regulating following the removal of rent cap last year.
Meanwhile the office sector has seen higher occupancy ratios, favouring landlords of Grade A developments with greater negotiating strength and the ability to achieve higher rents on new leases while reducing incentives. Also, given the limited availability, deals being closed are generally for smaller spaces which typically command a higher rent on a per sqm basis, in some cases achieving headline rents of over AED2,000 per sqm.
Occupancy levels in the retail sector continue to see improvement among off-island malls, although incentives being offered to secure leading brands have in some cases been significant, including full CAPEX for fit out and rent free periods of up to 1 year.
Some prime retail malls in Abu Dhabi have achieved rental increases of between 10-15% on lease renewal, mainly due to improvements in footfall combined with the removal of the rent cap.
Four new hotel apartment buildings entered the market in Q3, with a total of 658 rooms. There are almost 5,000 additional hotel rooms in the development pipeline, of which 2,053 are under construction and scheduled for completion in 2015. Over 90% of this new supply is targeting the 5 star sector of the market.
Paul Maisfield, Chief Executive Officer of MPM Properties, said “Our findings show that the outlook for the rest of the year and into 2015 is pretty stable, though there are a number of pockets of activity or shortages of higher quality space across all sectors which are resulting in some prices falling outside of the mean averages that we have identified. The fact that our Rental Index shows that rents are still in the range of 0-5% highlights the fact that the market is self-regulating following the removal of rent cap last year.”
MPM identify demand drivers in the future including Emirates Global Aluminum developing a US$3 billion alumina refinery, Etihad Rail launching the 628 km second phase of the UAE railway network which will attract new companies to free zones, as well as tourism initiatives to attract cruise passengers by developing a new cruise terminal and introducing multi-entry cruise visa for entry into UAE.
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