Abu Dhabi Government initiatives to stimulate the emirate's real estate market

• Office: Government initiatives aimed at allowing 100% foreign ownership in select sectors to stimulate office demand.
• Hospitality: Reduction in tourism, municipal and municipality hotel room fees, expected to boost visitor numbers and positively impact hotel performance.
• Retail: Retailers continue to leverage on new and innovative F&B and entertainment concepts to attract footfall and gain a competitive edge, with new economic and tourism initiatives further supporting the sector.

Dubai: Abu Dhabi’s real estate market is expected to be supported by various government initiatives aimed at stimulating the overall economic performance of the emirate - according to a new report by CBRE, the global real estate consultancy firm.

The report shows that 28,000 residential units will enter the market between 2020 and 2023, adding to an existing 258,000 units - as of 2019 H2. Changes in the freehold law that have enabled expatriates to own freehold property in over 15 designated investment zones, is expected to have a positive impact on the residential market. Another initiative which may influence residential purchase decisions in Abu Dhabi in the long run is the launch of the Golden Card system in the UAE, that offers a 10-year permanent residency to investors, entrepreneurs, chief executives, scientists and outstanding students – subject to certain conditions. 

During 2019 H2, hotel demand has been positively impacted following major events, such as Special Olympics, AFC Asian Cup, Abu Dhabi Showdown Week, Formula 1 and the Papal Mass, which took place last year. The number of hotel guests reached 3.8 million in Q3 2019, representing an increase of 2.9% compared to the same period in 2018. Apart from the existing 33,000 keys accounted for in 2019 H2, Abu Dhabi’s hospitality sector is set to add an extra 9,300 keys within the next three years.

Growth in hotel occupancy can also be attributed to a number of Government measures last year, including a reduction in tourism, municipal and municipality hotel room fees, that have had a positive impact on hotel performance. In addition, the Department of Culture and Tourism in Abu Dhabi launched an AED 600 million fund to enhance the city’s portfolio of entertainment and business events, with the aim of expanding the city’s tourism profile.

Office demand is also expected to be supported by Government initiatives to create jobs and

increase economic activity. At the end of 2019 H2, existing office supply stood at 4.3 million sqm gross leasable area (GLA) with an expected delivery of an additional 0.6 million sqm GLA by 2023. Primary office rental rates showed AED1,180 - 2,260 per sqm per annum, while the secondary office rental rates came in at AED700-1,185 per sqm per annum.

Government initiatives aimed at boosting economic activity, such as allowing 100% foreign ownership in certain sectors, is set to further stimulate demand, together with the launch of “Hub 71”, a AED 535 million incubator fund for tech start-ups and venture capitals. “Ghadan 21”, a three-year economic stimulus package of USD 13.6 Billion will also be in place to create additional jobs, advancing the market performance of office sector.

In the retail sector, there has been an increase in space per capita with additional retail supply anticipated to enter the market. In 2019 H2, the report reveals super-regional and regional malls witnessed performance averaging AED 2,420 – 2,960 per sqm per annum, while the organised street retailers accounted an average rate of AED 1,615 – 2,150 per sqm per annum.

To further stimulate the retail industry, a number of economic and tourism initiatives have been introduced to positively influence retail spend in the emirate. CBRE also reports a notable shift in spending behavior with consumers moving towards unique homegrown concepts. The trend for innovative F&B and retail concepts is set to continue, with F&B comprising a larger section of retail mix in newer malls. The report shows that existing retail supply stands at 2.8 million sqm GLA, with an additional 0.8 million sqft GLA expected to enter the market over the next three years.

Simon Townsend, Head of Strategic Advisory at CBRE MENAT, said: “The competitive market conditions have led to an end-user driven market, especially in the capital. Given this business appetite, we see potential for developers to devise creative schemes to engage with more investors and buyers. In the office sector, for example, landlords have reduced service charges, and are offering capex contributions and longer rent-free periods, as a strategy to sustain higheroccupancy levels. It is extremely promising to see the Government’s ongoing commitment to introducing initiatives that promote economic growth and continued investment in the market, and, we are confident that under this dynamic leadership, Abu Dhabi is well-placed to experience positive trends across key sectors in the future.” 

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About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2015 revenue).  The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide.  CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting.  Please visit our website at www.cbre.ae 

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