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ABU
DHABI
MARKET
UPDATE
2020/2021
FOREWORD
ABU DHABI
MARKET SNAPSHOT
2020/2021
As with the wider UAE market, Abu we have seen other asset classes such as retail
Dhabi’s economy and real estate market logistics and warehousing perform surprisingly well
saw the lingering impact of COVID-19 as occupier behaviour adjusted to the new normal of
and contractions in household income increased online retail.
weighing down upon sales and rental
demand. However, Abu Dhabi’s economy That said, Ghadan 21 - Abu Dhabi’s AED 50 billion
has been relatively resilient during 2020 accelerator program offered stimulus packages,
due to previous optimisation measures rebates and waivers on various government fees in
taken over the last few years, particularly 2020 including no real estate registration fees and a
in the hydrocarbon and banking sectors. 20% rent rebate for F&B, tourism and entertainment
facilities, thus supporting businesses. Furthermore,
Interestingly, in 2020 residential prices and rents with the recently announced 100% ownership of
displayed stability, particularly for superior built businesses by foreign nationals coupled with a range
residential stock as prices were already at cyclical of other government-led demand drivers, there
lows with little room for further contraction. In appears to be a broad consensus that the emirate
fact, a few established residential districts saw is expected to see a potential uptick in market
green shoots of recovery over Q4 2020. Whether sentiment in 2021.
this interim uptick will be sustained over 2021 will
inherently depend upon the overall buoyancy of the With Aldar expanding its portfolio with the
economy. development and asset management of projects for
the Abu Dhabi government and the steady rise in
On the other hand, the Abu Dhabi office market its stock value, it is now the UAE’s largest developer
continues to face consolidation and flight to quality - further boosting the overall market sentiment of
as rents and occupancy levels come under further Abu Dhabi.
downward pressure, particularly in the Grade B and
C market. Occupiers are increasingly taking the With the residential market showing initial signs of
view of mitigating risks and encouraging staff to stabilisation and the performance of the real estate
return to the workplace in a safer built environment sector broadly tied to the wider economy, which
without necessarily incurring an increase in rental is being boosted by effective stimulus measures,
outflow. This occupier preference has focused most changes in citizenship laws and record high
transaction activity in superior managed Grade A vaccination rates, we foresee Abu Dhabi’s real estate
and single owned assets, therefore the limited Grade sector to be relatively resilient over 2021.
A market continues to show resilience.
While brick & mortar retail and hospitality sectors
continue to face headwinds in the wake of COVID-19,
This publication
This document was published in February 2021. The data used in the charts and tables is the latest available at
the time of going to press. Sources are included for all the charts. We have used a standard set of notes and
abbreviations throughout the document.
ABU DHABI MARKET UPDATE 2020/2021
RESIDENTIAL Sales Market Average Villa Sale Prices 2019 vs. 2020
MARKET
1,400
For the first time in five years, average villa sales
prices witnessed a 2% year on year increase, 1,200
however, apartment prices saw a nominal -4%
drop, albeit because of limited transaction 1,000
Sales Price in AED / sq. ft.
activity as buyers took a wait and see approach,
making prices appear to be relatively stable. 800
Supply Abu Dhabi also saw the common theme that
is being reflected in most markets post the 600
There were over 4,500 units delivered pandemic, with larger units and villas witnessing
400
in Abu Dhabi over 2020 with most higher demand as occupiers adjust to lifestyle
handovers located in Al Raha Beach, Al requirements. This has translated into a rise of
200
Reem Island and Yas Island. The most 3.5% quarter-on-quarter in average villa asking
prominent deliveries were apartments prices over Q4 2020. 0
in The Bridges by Aldar and villas in Yas Al Reef Al Raha Ghadeer Golf Hydra Saadiyat
Acres Phase 1. Prices in various communities such as Al Raha Villas Gardens Villas Gardens Village Island
Beach, Yas Island and Saadiyat Island appear to 2019 2020
The Abu Dhabi market historically has had be buoyant, indicating a preference for newer
relatively lower levels of supply handovers and quality build products. While the market
each year, however, 2021 is expected to remains price sensitive, we continue to see a Average Apartment Sale Prices 2019 vs. 2020
witness a spike with over 7,000 units flight to quality and affordability from both end-
slated to be handed over. A significant users and investors. Softening market conditions 1,400
portion of the new supply projected for have resulted in both homebuyers and tenants
1,200
2021 is expected in Al Reem Island and having more bargaining power when negotiating
Al Raha Beach which are witnessing sales terms.
1,000
substantial development activity followed
by Yas Island. Developers continued to spur sales through
Sales Price in AED / sq. ft.
800
various incentives and offers, including
While the number of actual handovers attractive post-handover payment plans and 600
may be slightly lower, we expect existing fee waivers while also partnering with banks to
and future inventory to face further provide buyers access to preferential mortgage 400
absorption challenges given the current rates.
economic climate of subdued demand. 200
While Covid-19’s impact will continue to affect
demand, we expect the market to show early 0
Al Al Al Al Reef Marina Saadiyat Sun and The
signs of recovery in 2021 with the pace of price Muneera Zeina Bandar Downtown Square Beach Sky Gate
Abu Dhabi Residential Supply reductions stabilising provided the broader Residences Towers
economy recovers. 2019 2020
300 Source: CORE Research
7
250 Abu Dhabi Sales Price Index
Number of Units in Thousands
1,500
200
1,300
150 Sales Price in AED/sq. ft. 1,100
199 211 223 236 246 251 256 261 264 269 269 900
100
700
50 500
300
0 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov
16 16 16 16 16 16 17 17 17 17 17 17 18 18 18 18 18 18 19 19 19 19 19 19 20 20 20 20 20 20
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E
Existing New Supply Villa Sales Price Index Apartment Sales Price Index
Source: CORE Research Source: REIDIN, CORE Research
4 core-me.com/research core-me.com/research 5
ABU DHABI MARKET UPDATE 2020/2021
Rental Market Average Two Bed Apartment Rentals
2019 vs. 2020
As a result of job losses, salary cuts and 160
household income contraction, many tenants 140
Annual Rents in thousands AED
relocated or repatriated, thus putting continued 120
downward pressure on the rental market. 100
80
That said, we witnessed a relative level of
60
stability in average rents in the villa market
40
with only a 3% year-on-year drop as rents
started to stabilise over H2 2020, particularly 20
for well-developed villa communities in Yas 0
Al Raha Saadiyat Beach
Island, Al Raha Gardens and Saadiyat Island. Al Reef
Villas
Al Reem
Island
Khalifa
City A Beach Residences
This resilience stems from the rising demand
2019 2020
for properties with more open space, gardens
and swimming pools due to work from home
demands. Furthermore, many tenants are Average Three Bedroom Villa Rentals
looking to move away from apartment living as 2019 vs. 2020
they are hesitant to share common areas with 400
other residents. With many occupiers continuing 350
Annual Rents in thousands AED
with hybrid workplace strategies, requirements 300
for larger, more open residential space may 250
continue over H1 2021. 200
150
While average apartment rentals displayed
100
a 5% year-on-year drop, the older stock has
50
witnessed further reductions as tenants
relocated to superior buildings at similar 0
Al Reef Golf Al Raha Hydra Saadiyat Beach
or lower rentals. Furthermore, many of the Villas Gardens Gardens Village Villas
better build and newer apartment complexes 2019 2020
have seen continued softening over the last
few years and now have limited room for
further reductions. Therefore, it is important
Villas Gross Apartments
to note that while rental reductions may show
lower year-on-year changes, various landlord 5.5% Yield 6.9%
incentives such as rent-free periods, a higher
number of cheques and other forms of flexibility
are supporting headline rentals. Source: CORE Research
Abu Dhabi Rental Price Index
110
100
90
80
Annual Rents in AED/sq. ft.
70
60
50
40
30
20
Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov
16 16 16 16 16 16 17 17 17 17 17 17 18 18 18 18 18 18 19 19 19 19 19 19 20 20 20 20 20 20
Villa Rental Index Apartment Rental Index
Source: REIDIN, CORE Research
6 core-me.com/research core-me.com/research 7
ABU DHABI MARKET UPDATE 2020/2021
OFFICE MARKET INDUSTRIAL AND WAREHOUSING
Most of the office demand in Abu Dhabi came Abu Dhabi’s industrial and warehousing sector occupiers to store stock, thus requiring more space,
from relocations where occupiers moved to similar- defied market conditions with both enquiry and particularly for essential and non-perishable goods.
sized offices largely to upgrade to superior grade transaction levels seeing an increase in 2020. The
buildings at similar or lower rental outflows as they negative impact of COVID-19 that was felt in other We have seen ICAD and Mussafah rentals hold
took advantage of softened rentals. Many tenants sectors with a slowdown in demand was reversed steady year-on-year due to limited availability of
also consolidated offices spread across multiple in the case of the warehousing sector. With online stock while KIZAD is also taking a more active role
locations or floors within the same building to a retail gaining significant market share over the in managing leasing and maintaining occupancies.
single level office. Most office movement stemmed last few months, we have seen rising demand for Notably, Mussafah is witnessing a steady demand for
from large occupiers in the oil & gas sectors, warehousing space from both online and brick and warehouses with tenants also requesting the option
government and semi-government entities and mortar retailers as they expand their offerings to of office space within the same facility, thereby
ranged between 500 to 2,000 Sq.m. cater to increasing online demand. enabling occupiers to consolidate operations and
warehousing requirements into a single premises
Although the office market in the capital continues In other industrial sectors, apprehension of and for smaller enterprises to test market conditions
to face challenges, we have seen the impact of further supply chain disruptions are also fuelling and expand as they scale up operations.
COVID-19 further heighten the trend of flight to
quality with tenants looking to move to superior
managed and built properties to bolster employee
confidence and safety while not significantly altering Abu Dhabi Warehousing Lease Rates 2019 vs. 2020
cash outflows. 600
Office tenants are becoming increasingly aware 500
Rents in AED / sq.ft. / Annum
of the importance of building maintenance and
facilities management. Most Grade A buildings 400
which are largely single owned have been proactive
300
with increased COVID-19 risk mitigation protocols
including visitor security, thermal screening, frequent
200
cleaning and disinfecting measures and building
management protocols for COVID-19 positive 100
cases, etc. Such stringent measures are generally
missing in Grade B and Grade C buildings. As rents 0
have softened across grades, the advantage of Abu Dhabi Mussafah ICAD ICAD 2 KIZAD Al Markaz Al Mafraq
moving into a Grade A building is multi-fold - from Airport Free
Abu Dhabi Office Rental Range 2019 vs 2020 a financial as well as user experience and safety Zone
2019 2020
perspective.
Source: CORE Research
2000
Maximum This pivot from occupiers towards Grade A space
1750
Minimum
has led the limited Grade A stock in Abu Dhabi to
display relative resilience in occupancy and rents.
1500
With most of the office stock in Abu Dhabi being
Grade B and C, we are witnessing a significant drop
Rents in AED / sq.m / Annum
1250
in rents and occupancy levels in this segment as
most tenants look to relocate. With landlords being
1000
pushed further to offer better terms in the aftermath
of COVID-19 making the market notably tenant-
750
friendly, rent-free periods, rental deferrals, multiple
check payments and contribution to fit-outs are
500
becoming increasingly common. Established tenants
with strong cashflow are looking to lock-in longer
250
lease terms to take advantage of the commercial
terms being offered in the current market. We
0
expect these trends to continue over to H1 2021 as
Prime / Grade A Grade A in Grade B
the market continues to adjust to ongoing economic
Grade A+ Secondary conditions.
Areas
Rental Range: 2019 2020
Source: CORE Research
8 core-me.com/research core-me.com/research 9
ABU DHABI MARKET UPDATE 2020/2021
RETAIL MARKET
Abu Dhabi’s retail market has been the most
challenging asset class even before the onset of the
COVID-19 led market slowdown. The contraction in
household income and relative hesitation to shop in
physical stores continues to negatively impact the
retail sector. That said, over the last few months we
have seen an uptick in footfalls with a particularly
active winter season. Also, a few luxury retailers
have seen steady demand as many HNI consumers
shopped locally as travel restrictions inhibited them
from visiting other international cities. While the
push towards online retail has been gradual over the
last few years, the pandemic has accelerated the
acceptance of this format amongst buyers. We have
seen many retailers significantly increase their online
presence and scale-up back-end operations and
logistics to accommodate this shift.
We have also witnessed community retail and
smaller ground-floor retail outlets perform relatively The future of malls will highly depend upon
well as they largely cater to essential retail. While responsive mall owners providing retailers rental
there are many government and landlord led incentives to last these tough market conditions
incentives, mall retail continues to face challenges while also creating innovative customer engagement
as retailers look to optimise footprint and reduce initiatives to retain shopper interest. We forecast
costs across the retail group/portfolio. For retailers, the super-regional malls to fare better in this
rents form only a portion of the cost with staff and regard while older and smaller malls face increasing
merchandise accounting for larger costs, pushing challenges and more store closures.
brands to further strategize locations to maximise
exposure and sales. Retailers will need to have greater synergy between
their brick and mortar and online offerings to stay
With retailers facing lower footfalls, most are turning relevant to changing and increasingly demanding
to revenue share models to withstand market shopping behaviour.
conditions. Landlords are also being perceptive to
these conditions and realising that rent deferrals In terms of retail supply, there were no major retail
may not be a viable solution and are open to handovers in 2020 with Reem Mall expected to
revenue share models to maintain occupancy and a be handed over by the end of 2021, adding over
good retail tenant mix. 270,000 Sq.m. of retail GLA.
Total Gross Leasable Area
3.5
3
2.5
Million Sq.m
2
1.5
1
.5
0
2014 2015 2016 2017 2018 2019 2020 2021E
Existing New Supply
Source: CORE Research
10 core-me.com/research core-me.com/research 11
ABU DHABI MARKET UPDATE 2019/2020
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