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KIZAD expansion set to drive long term industrial activity in Abu Dhabi

6 September 2017

Abu Dhabi’s economy remains intrinsically linked to the hydrocarbon sector, which has been a critical engine of growth for a range of supporting and related economic segments, each of which plays a key role in creating fresh demand for both residential and commercial property in the emirate. 

The Property Report - United Arab Emirates 2017 shows that the first six months of 2017 have seen a continued lacklustre performance of residential values in Abu Dhabi’s main residential investment areas, with values overall dropping by 0.9%. The seemingly slower rate of decline has improved the annual change to -6.3% in the 12 months to the end of June, from -7.5% at the end of Q1. This latest change now leaves average residential values standing at just a little over AED 1,150 psf. Apartments posted larger corrections in the six months to the end of June of -1.4%, compared to just -0.3% for villas.

Despite the mixed performance of the residential market in the first half of the year, the industrial sector has been the city’s brightest star, with rents holding steady for the last three quarters. This has been underpinned by robust demand for industrial space and a genuine lack of surplus stock to upset the delicate supply-demand equilibrium. 

Edward Carnergy, head of Cluttons Abu Dhabi noted: “We are encouraged by on-going activity in Abu Dhabi’s industrial market. KIZAD is developing into a regional manufacturing hub and remains the nucleus of overall industrial activity in the emirate, with international logistics firms vying for a presence in the UAE’s largest free zone. The announcement of a 100-sq. km expansion earlier this year is expected to drive growth in the sector for years to come.” 

The report states that average prime office rents slipped by AED 50 psm to AED 1,800 psm at the end of the second quarter, 10% down on last summer. Similarly, secondary rents (AED 900 psm) are 25% lower than the summer of 2016, while office rents for more tertiary space have registered a 19% fall in the last 12 months and currently stand at an average of AED 650 psm.

Durrani said: “We expect to see rent corrections in the office market of between 5% to 10%, across the board, by the end of 2017 and the market’s performance will remain hinged on the ability of the economy to shake off the drag generated by the low oil price environment. Looking ahead, while stability in rents is expected this year, should the economic weakness persist into 2018, headline rents are likely to begin dipping slightly.”