The overall requirements for new office space in the UAE's capital city reached 11,260 sq.m. during Q2, up from 9,750 sq.m. during the same period last year.
Also, rents for Grade A offices in Abu Dhabi have seen a growth in Q2, a review of key trends and performance of the emirate's office market showed.
Headline rents for Grade A offices Abu Dhabi have shown resilience during the second quarter, mirroring the emerging trend in Dubai, with rents in three of the five submarkets – Abu Dhabi Freezones (AED 1,970 psm), Capital Centre (AED 1,325 psm) and Corniche/Downtown (AED 1,600 psm) – experiencing rental growth, Knight Frank said in its Abu Dhabi Office Market Review report.
After rising by 6.7 percent over the last 12 months, rents in the Corniche/Downtown area have now reached their highest level since at least 2017.
Hopeful and holding on
According to the UK real estate consultancy, anomalous performance of climbing rents and steady vacancy rates is also in part being driven by landlords’ needs to boost their rental income to meet 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," Faisal Durrani, Head of Middle East Research, Knight Frank, said.
Of all new space requirements, the banking and finance sector dominated demand during Q2. This was closely followed by the healthcare and education sector.
“Demand levels in Q2 were about 15 percent higher than last year, fuelled by the banking and finance sector, alongside the healthcare and education sector, each of which accounted for about 20 percent of new demand,” Durrani said.
“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”, he added.
The largest new requirement during Q2 however came from the industrial and logistics sector, with 2,000 sq.m. being sought in the Capital Centre area.
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, the report noted.
(Writing by Seban Scaria; editing by Daniel Luiz)
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