Abu Dhabi rents subject to changing market dynamics.

Summary: As tenants benchmark rents in the capital against Dubai's lower levels, market

As tenants benchmark rents in the capital against Dubai's lower levels, market dynamics, especially the increased housing supply in Abu Dhabi, will naturally lead to landlords to be more flexible with their pricing, according to the latest quarterly report from Asteco, the largest property services company in the United Arab Emirates.

In the most comprehensive report of its type, Asteco says Abu Dhabi continues to see an increase in the supply of residential property with almost 1,000 new apartments delivered to the market in the last quarter, predominantly in off-island locations, including Mussafah, Mohammed Bin Zayed City and Khalifa City.

The Asteco Q3 2009 report on the Abu Dhabi property scene adds, however: "These apartments have initially been leasing slowly due to a mismatch between landlords' rental expectations and those of prospective tenants. This is only natural, discounting will be more prevalent when the market is faced with increased supply, including the 'Dubai and Drive' option where the differential in rental prices is still hard to ignore."

Research conducted by Asteco, which carries out market analysis, also found that around 400 apartments will come online this month on Abu Dhabi Island, in addition to a continued supply of apartments coming up in Khalifa City A.

"Currently, commuters are attracted to Dubai by cheaper rents and a perception that Dubai represents better value for money, which is clearly visible from the volume of commuter traffic on the Abu Dhabi roads in the mornings and evenings," said Asteco CEO Elaine Jones.

"As better quality units are delivered in Abu Dhabi over the next six to 12 months, including Marina Square and Sun and Sky Towers, many daily commuters will consider these developments. It is clear, however, that this significant group of prospective tenants will benchmark these developments against comparable properties in Dubai - particularly in Dubai Marina.

However Jones admitted that it is not as cut and dried as that. "Many prospective tenants have to give notice to existing landlords, either husband or wife may still have a job in Dubai and of course there's the schooling issue. So market demand dynamics will not necessarily settle down until next summer."

The Asteco Q3 report also comments on the change of approach among letting agents as the Abu Dhabi market evolves. "Last year many brokers were charging viewing fees and most were not willing to entertain telephone enquiries from prospective tenants," the report says. "This year, however, the majority of letting agents will offer to collect and drive prospective tenants to view numerous apartments on their books without charge, reflecting the fact that some apartments have remained vacant for a number of months."

According to the Asteco report, Khalidiyah and the Corniche continue to be in high demand but tenants have also started to look at developments off Abu Dhabi Island. Average rental rates on the Corniche for one, two and three bedroom apartments are currently AED130,000, AED175,000 and AED220,000 respectively, down from their peaks of AED180,000, AED260,000 and AED350,000.

"Towers equipped with gym and swimming pool have started to command a premium and this is expected to be the trend as Marina Square, Capital Plaza and Meena Plaza come online," the report adds.

The Asteco Abu Dhabi Q3 2009 report also highlights demand from small companies in the office market; expansion in the retail sector; and increasing choice in Al Ain's residential market. For more details, please visit

2009 Al Bawaba (www.albawaba.com)

2009 Al Bawaba (Albawaba.com)

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