Flight to quality driving prime office rents in Abu Dhabi

Office rents in Abu Dhabi’s best buildings have started to stabilise and even rise in some cases, according to Knight Frank Middle East’s biannual Abu Dhabi Office Market Review for Summer 2021.

Faisal Durrani, Head of Middle East Research, Knight Frank, explained, “Businesses continue to zero in on best-in-class office space, a trend that has been supercharged by the pandemic. With the exception of the Corniche-Downtown area, office rents are still below where they were 5 years ago, which is adding to the appeal of an office upgrade.

The overarching theme echoes other global cities, where businesses are actively targeting the very best offices as a way to mitigate against staff attraction and retention challenges – an issue that will transcend the pandemic and only intensify further. Coupled with the projected economic recovery in Abu Dhabi and the UAE, businesses are going to have to work hard to fill vacancies and occupying first class office space is going to be a critical tool in the armoury in the war for talent”.

While rents have begun to recover in the UAE capital’s best buildings, vacancy rates have remained relatively stable. This is in part driven by landlords’ needs to boost their rental income in order to meet their financing obligations and so some are perhaps adjusting rents upwards without new demand to support any increases.

“While it may be true that some landlords are attempting to create an illusion of a squeeze on vacant stock, new space requirements are rising. Demand levels in Q2 were about 15% higher than last year, fuelled by the banking and finance sector, alongside the healthcare and education sector, each of which accounted for about 20% of new demand. Interestingly, the healthcare and education sector’s requirements are in part stemming from the government’s decision to manufacture Sinopharm Covid-19 vaccines at KIZAD, which is boosting office space requirements from healthcare linked business, some of whom are looking for a first base in Abu Dhabi”, added Durrani.

The report notes that at 17.8%, the industrial and logistics sector accounted for the third largest source of new space requirements, with the largest single source of demand being for 2,000 sqm of space in the Capital Centre area by a business in this sector.

The other noteworthy source of inquiries stems from Israeli businesses, linked to the technology sector, who are looking for a first presence in the UAE following the normalisation of relations between the two states in September 2020.

View the report here