Asteco Reports Further Declines in Rental Rates Across Abu Dhabi, Al Ain

Abu Dhabi Real Estate Report Q2 2018 by Asteco, a leading property services company in the UAE, has recorded a continued decline in villa and apartment rental rates across all asset classes in Abu Dhabi and Al Ain. The quarterly report also highlights the current and anticipated handovers of key projects across the emirate.

In Abu Dhabi, apartment and villa rental rates decreased by 2% and 4% in Q2
2018, and witnessed an annual drop of 10% and 9% respectively, showing
comparable patterns to last quarter.

Rental declines for studios to three-bedroom apartments ranged from 1% to 5%
over the quarter and 5% to 18% over the course of the year.

The highest drops in the villa rental market since Q2 2017 were registered for
Golf Gardens (14%) and Al Raha Gardens (13%).

Apartment sales prices in the secondary market remained relatively stable over
the quarter, however, they recorded an average annual decline of 8%. Al Raha
Gardens led the softening in villa sales prices, reporting an average fall of 4%
in Q2 2018 – compared to 2% in Abu Dhabi overall.

Speaking on residential sales, John Stevens, Managing Director of Asteco, said:
“Sales in Abu Dhabi remained sluggish, with noticeably low uptake of larger high
-end properties. However, off-plan projects with attractive rates and flexible
payment plans continued to generate interest, including the newly launched
second phase of Al Ghadeer that attracted significant demand.”

Approximately 1,000 residential units were completed in Q2 2018, with the
majority of the supply concentrated on Al Reem Island. By end-2018, 5,800
additional residential units are scheduled for handover, mainly in locations
such as Al Reem Island, Yas Island, Saadiyat Island, Al Raha Beach and Rawdhat,
as well as across mainland Abu Dhabi.

Demand for office space remained tepid, with generally low levels of uptake,
while certain free zone areas performed better, achieving occupancy levels of up
to 95%. The anticipated ADIB headquarters on Airport Road is due for handover by
end-2018, while the completion of the Omega Tower on Al Reem Island has been
postponed to 2019.

In Al Ain, villa rental rates fell by an average of 7% since Q1 2018 and 12%
annually, with a more pronounced drop for larger four- and five-bedroom units,
particularly where rates and incentives were not aligned with the market.

Rents for prime compounds, which benefitted from close-to-full occupancy rates,
remained relatively stable. Similarly, apartment rental rates decreased by 2% on
average in Q2 2018, although established communities bucked that trend.

Stevens said: “We are witnessing a shift among residents in Al Ain towards high
-quality, self-sustained communities with supporting facilities, as they
recorded high occupancy rates, in contrast to stand-alone buildings and villas
that reported minimal interest and high vacancy levels. To attract and retain
tenants, landlords continue to offer incentives including up to one month of
free rent and flexible payment terms of up to 12 cheques.”

Several projects in the Town Centre and Asharej areas of Al Ain were slated for
handover in Q2 2018, but have been delayed and are now expected to be completed
by end-2018.

Retail rental rates remained broadly stable in Q2 2018 after declining last
quarter due to a drop in consumer spending. This, however, is more a result of
limited demand rather than an indication of a stable market. Headline office
rents were also unchanged over the quarter owing to the limited number of
newcomers to the market.