Rents for Old Buildings may Decline in Capital

Apartment rents in older and low quality buildings are likely to decline during the fourth quarter of this year in Abu Dhabi, as villas and ‘off-island’ living options become available, predicts the real estate consultancy 
Landmark Advisory. “Larger three and four-bedroom apartments are likely to see a rent drop as more tenants will be attracted by off-island villa developments such as Al Raha Gardens or Al Reef Villas which offer more space, better quality, and affordable rent levels,’’ said the latest ‘lease guide for Abu Dhabi’, issued by Landmark Advisory in collaboration with LLJ Property. “Rents for one and two bedroom units are likely to remain stable, but low quality units are likely to decline. Even if there is a shortage of smaller units, many tenants are simply unwilling to accept high rent for low quality,” the report said quoting Jesse Downs, Director of Research, Landmark Advisory. The report however said the average rents in Abu Dhabi, for both apartments and villas, remained relatively stable during third quarter and for the first part of fourth quarter of this year, only experiencing marginal declines.

“Low quality units continue to be the worst performing assets. Declines, however, are largely marginal, which indicates rental stabilization,” said Downs. “In the apartment segment, while low quality units have declined up to 5 per cent , good quality units remained without any significant change.” The report found that continued demand for smaller units, which remain in short supply, has kept average rent levels for those units on Abu Dhabi Island quite high, with one and two bedroom apartments priced at Dh 130,000 and Dh 190,000 per annum respectively. “A continued influx of young professionals seeking centrally located apartments keeps this sector buoyant,” explains Andrea Menown, Leasing Manager at LLJ Property. “At the same time we have seen an increased level of demand for villas as existing residents, frustrated by congestion and parking issues affecting older centrally located apartments, move to good value off-island compounds offering community facilities and proximity to newly developed amenities.” Similarly villa rental levels have also remained stable.

“While low quality units slightly decreased up to eight per cent, good quality villas have held their value, especially on the ‘main island’ of Abu Dhabi. On the Abu Dhabi outskirts, rentals are now stabilizing after strong declines in the first half of 2009,” 
explained Downs. “Currently the rent levels of good quality units, both large and small, are stable, as the market continues to experience a shortage of this stock,” said Andrea Menown, “Developments offering added benefits such as parking, community amenities, sports facilities, retail and proximity to schools are holding steady in the market.” The report identified that office rent levels have remained relatively stable since early to mid-September, despite declines of up to 20 per cent during 
July and August.“In terms of commercial property, demand is currently focused on smaller units, as the majority of companies entering Abu Dhabi are readjusting their previous approach, which was bullish during Q1/Q2 2009. In comparison, demand for larger spaces is restricted to a small number of preexisting companies that are still planning to expand or relocate,” Downs said.