Abu Dhabi’s office and industrial markets are showing signs of growth, with a rebound in rents already underway, according to real estate consultancy Knight Frank.
Office rents in three out of the six prime office submarkets monitored by Knight Frank experienced growth ranging from 3.5% to 12% during 2022 This turn around is attributed to the rebound in economic growth and the increase in employment levels
While Abu Dhabi’s office market has been slower to recover from the pandemic when compared to neighbouring Dubai, rapid economic expansion – estimated at 8.8% last year – has significantly contributed the change in the fortunes of the office market, the company said. This, combined with an uplift in job creation rates has started to filter through in the form of new office demand.
Knight Frank cites employment data from Oxford Economics which estimates employment to have reached 1.29 million at the end of last year. While this figure is still shy of pre-pandemic levels, by the end of 2023, 1.32 million people are expected to be working in the capital, eclipsing pre-pandemic levels.
According to the report, tThe most critical factor in supporting rental growth is the severe shortage of prime Grade A office space. This is of course a double-edged sword – a lack of supply is to an extent holding back true demand, with occupiers willing to settle for older stock in more secondary locations.
The picture in Abu Dhabi’s industrial market is more stable, with warehouse rents in the six main markets tracked by Knight Frank remaining unchanged during 2022.
Rates in Abu Dhabi Airport Free Zone (AED 550 psm) are still the most expensive in the city. Even though ADAFZ leased more space in 2022 than it did in 2021, rents remain stable, primarily because vacancy levels remain stubbornly high.
Other industrial areas in Abu Dhabi such as KEZAD did not experience any change in rents as demand remains steady.
Also published on Medium.
