Abu Dhabi's Corporate Office Market Gets A Makeover

As more Grade A and B supply enters the market, corporate tenants stand to gain from options coming on stream in next few months. In hindsight, the global financial turmoil and the consequent apathy among corporate tenants to go for upgrades may be the best thing to happen to Abu Dhabi's office space. It works like this: by staying put in their existing locations through 2009, they now have an opportunity to seek the crème de la crème of new office stock getting ready this year. "As more Grade A and B supply enters the market, companies will start to relocate to higher quality space," says Jesse Downs, director of research & advisory services at Landmark Advisory. "However, due to logistical and current economic concerns, we expect such relocation will happen gradually over the next 12 to 18 months.

Based on present estimates, Abu Dhabi should see a doubling of quality office space by 2012, of which one-fifth will enter the market this year itself according to Landmark Advisory. This will soften the existing high rentals, but primarily in the Grade C category. During 2009, office rentals in Dubai have dropped a lot more, by 60 per cent, than in undersupplied Abu Dhabi. Even then, average rent for offices per square foot in the capital declined by 25 per cent to around Dh2,800 from their peaks, according to the latest data from Jones Lang LaSalle. This being the case, corporate tenants will do well to shed their caution and check out the options coming through over the next few months

Shortage of quality accommodation is suppressing total demand in Abu Dhabi as it resulted in many companies taking a small presence in this market," opines Piers Barttelot, director of agency, Abu Dhabi - Jones Lang LaSalle. "The back-office and other support facilities are being housed in Dubai where there is a much greater range of high quality office accommodation for lease." CB Richard Ellis recognizes that demand has declined because of the global economic downturn. However, it expects businesses to re-examine the market and expand or relocate from sub-standard accommodation into new Grade ‘A' space when it becomes available. "We expect latent demand from within Abu Dhabi to be strong in 2010-11, with the addition of new players entering the market over the same period," says Richard Foulds, director and head of Abu Dhabi as well as director of leasing at CB Richard Ellis Middle East. "There is also evidence of new international occupiers looking at the market for the first time.