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Abu Dhabi’s strong economic rebound and expanding employment levels are driving up office rents in the UAE capital, according to a new report.
Office space leasing rates in three of the UAE’s capital’s six main submarkets have grown between 3.5% and 12% by 2022, Knight Frank said on Monday.
The supply of office space in the UAE capital is also limited, while occupancy rates in popular buildings are already hovering at 95% or above.
More businesses are looking for rental space in Abu Dhabi, the real estate consultancy said, noting that demand for new office space in Abu Dhabi was around 344,900 square feet (32,000 square meters) last year, up 5% from 2021. The banking and tenant finance sectors accounted for the bulk of new demand, around 20%.
Abu Dhabi’s office sector has been slower to recover from the impact of the health outbreak than the neighboring emirate of Dubai, but the recent rebound in economic growth “has contributed to a change in the fortunes of the market”, says Faisal Durrani, Partner – Knight Frank Middle East research supervisor.
“This, combined with increased job creation, has started to trickle in in the form of new office demand,” Durrani said.
positive trend
Abu Dhabi outperformed its peers in the Middle East and North Africa (MENA) last year, with gross domestic product (GDP) growth of 10.5% in the first nine months of 2022, the highest in the region.
Employment in the UAE capital reached 1.29 million at the end of last year, Knight Frank said, citing figures from Oxford Economics.
It added that the figure was still below pre-pandemic levels, but some 1.32 million people were expected to be working in the capital by the end of the year, surpassing pre-pandemic levels.
“The most critical factor underpinning rental growth is an acute shortage of prime Grade A office space. This is of course a double-edged sword – the lack of supply dampens real demand to some extent as tenants are willing to buy older stock in more secondary locations ,” said David Crook, partner in charge of Knight Frank Abu Dhabi.
Abu Dhabi expects to add approximately 275,000 sq ft of new office stock over the next two years, while occupancy rates in the city’s best buildings will hover at or above 95%. Crook said upward pressure on rents was likely to persist due to limited supply, especially for “top-notch” properties.
(Reporting by Cleofe Maceda; Editing by Seban Scaria)
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