Abu Dhabi office rents fall as companies continue to consolidate

Abu Dhabi office rents fall as companies continue to consolidate

Arabian Business, 27 April 2018

Commercial property rents in Abu Dhabi have adjusted lower to recent redundancies and office consolidations to reach a new equilibrium, according to consultants Core Savills.

Its latest Abu Dhabi Commercial Market Report – 2018 highlighted that international first phase expansions in the office sector continue to be limited during the first quarter of the year.

It said most of the ongoing office leasing activity is representative of occupiers upgrading to better premises by locking attractive mid-long-term contracts.

Andrew Ausama, head of Abu Dhabi Office at Core Savills said: “With landlords pushed to offer better terms in what is now a dominantly tenant friendly market, rent free periods, multiple check payments and contribution to fitouts are becoming increasingly commonplace.”

Grade B buildings and older office districts continue to witness deflationary pressures as many tenants are consolidating their activities in less office space or better buildings at similar costs, he added.

The report said that landlords who haven’t adjusted to these evolving market conditions by either adjusting headline rents, upgrading building premises or offering further floor divisions, are facing a standoff and losing tenants to better built premises offering flexible terms.

David Godchaux, Group CEO Core Savills, said: “Although rents are forecast to remain under pressure across the board in 2018, we expect the Grade A assets to be relatively resilient due to limited stock available and sustained underlying demand.
“Elsewhere, we expect the migration of tenants, for the reasons of either shifting to better premises or lower operating expenditures, to cause rising vacancy levels and further rental drops.”