|By Arabian Post Staff| Subdued economic growth continued to translate into job cuts, reduction of staff allowances and few employment opportunities, which resulted in increased vacancy rates in the Abu Dhabi property market, according to the latest report of Asteco.
Average apartment rental rates dropped by 3% over the quarter and by 10% during the past 12 months, with the highest rate of decline recorded for mid-end properties and large units within prime and high-end projects. Landlords offered reduced rents and flexible payment terms (up to 12 cheques) to retain existing Tenants and secure new leases.
The report forecast further pressure on rental rates as more deliveries add to the market supply. In addition to the 800 units delivered in Q3 2017, another 1,500 apartments are anticipated for handover by year-end. Sales prices for completed properties also recorded average quarterly and annual declines of 3% and 10% respectively. Meanwhile, the off-plan sales market fared slightly better, benefiting from good transaction volumes, particularly for prime and mid-quality properties as developers offered discounts and attractive payment plans to stimulate sales. Water’s Edge on Yas Island by Aldar, for example, was well received by Investors upon its launch at Cityscape Dubai in September 2017.
Residents continued to seek alternatives to reduce living cost amidst local, regional and global economic uncertainties. This has contributed to rising vacancy rates in many villa communities as Tenants opted to downsize to smaller or more affordable properties, whilst some even moved to apartment units to reduce their accommodation expenses.
Villa rental rates decreased by 3% on average in Q3 2017 and by 6% over the past 12 months. Al Raha Gardens, Hydra Village and the larger units of the Saadiyat Beach Villas recorded a more pronounced drop with rents softening by 7%, 4% and 5% respectively. Despite a marginal decrease in sales prices for completed villas, demand for prime and high-end off-plan projects, particularly those located on Yas and Saadiyat Islands, remained positive.
Bearish market sentiment in line with reduced business growth and low oil prices resulted in limited demand for office space. Quoted rental rates were broadly unchanged over the quarter, however, evidence indicated declines of up to 5% to 10% on contract renewals in several Grade A and B office buildings. In addition, Landlords continued to offer smaller units, discounts and incentives in order to retain existing Tenants and to sign new leases.
Rental rates for fitted offices in Grade A buildings ranged from AED 1,500 to AED 2,500 per sqm, whilst Grade B towers commanded between AED 700 and AED 1,400 per sqm depending on the location, payment plan and tenancy period. No major project completions took place over the past quarter. The ADIB Headquarters on Airport Road and Omega Tower on Reem Island are expected to handover in the next three to six months, increasing office supply by around 100,000 sqm.
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