Abu Dhabi real estate remains stable in Q2

28/07/2015 05:52 AST

JEDDAH — Abu Dhabi real estate market remains stable in Q2, according to the latest JLL Real Estate Market Overview report released Monday.

JLL, the world's leading real estate investment and advisory firm, today released its JLL’s “Q2 2015 Abu Dhabi Real Estate Overview” said the period saw continued stabilization across all asset classes, following the 2013-2014 market recovery.

The pace of demand growth has slowed due to the decline in oil prices affecting the strength of the oil sector and leading to a reduction in government spending and sentiment.

While short-term supply remains under control, the extent to which stable market conditions will continue very much depends on government spending plans.

For the Residential Sales market, while prices have remained stable over Q2 2015, there has been continued downward pressure on transaction volumes due to the decline in sentiment, although developers are still generally successful with new product launches.

Residential Rents have remained stable this quarter due to limited demand growth, but with vacancies remaining low in high quality, well-located schemes.

Office demand remains subdued due to contraction in some sectors and a slowdown in the oil sector and government infrastructure investment.

In spite of this, Grade A office rents have remained stable due to minimal vacancies in quality stock. Further office completions throughout the year are expected to increase the market-wide vacancy rate, but with Grade A rents being upheld.

Retail Rents remained stable this quarter and this is expected to continue in the short-term. A number of Super Regional malls are set to enter the market from 2018, which will partly be supported by new population and tourism growth, but will also cause the market to polarize between high and low grade stock.

The Hospitality market witnessed solid growth in hotel guests above 2014 levels driven by wide ranging initiatives to grow the tourism sector. ADRs have also registered an increase of 4% in YT May compared to the same period in 2014. Hotel occupancies registered 77% in YT May reaching the same levels as 2014.

David Dudley, International Director and Head of Abu Dhabi Office at JLL MENA, said: “The general trend for Q2 and indeed the first half of 2015 has been stability, with performance of most sectors remaining flat, and a slight increase in hospitality performance.”

He noted: “Following a two year bull-run we are currently going through a period of mid-cycle stabilization. This is primarily driven by a slow-down in the pace of demand growth, but with short-term supply completions under control the market conditions are stable.

The softening of demand principally stems from the decline in oil prices, which has directly affected Abu Dhabi’s dominant petro-chemicals sector, and also lead to a reduction in domestic government spending as the government re-prioritizes its projects, and a decline in investor sentiment.”

Moreover, he said “we still expect demand growth to continue, but at a slower pace. Employment creation and residential demand growth will continue to be sustained from projects commenced while oil prices were high – with projects such as the airport and Etihad expansion having an economic multiplier effect.

However the extent to which conditions remain stable over the next year or so very much depends on the government’s spending plans. With an increasing cost of living and a reduction in demand, we are currently at a ‘tipping point’, with market stability very much dependent on the government continuing to invest in to major new infrastructure and economic development projects.”

“Further key developments this quarter have been the government announcing new laws. The long awaited real estate laws have now been announced and are set for implementation

Saudi Gazette