Etihad Tower complex attracts international brands

Dubai: When Cartier signs up to open its largest Middle East store, it can be assumed the property is getting a lot of things right, especially when the new store location is not part of a high-end mall but part of Etihad Towers in Abu Dhabi.

Cartier is not the only name lending its heritage and aura to the retail cluster of the new upscale mixed-use development.

There are Salvatore Ferragamo, IWC and Bally among the 30-odd names that have space in the Avenue at Etihad Towers.

"All the outlets were pre-let, though we are holding back a couple to ensure the mix is right," said Richard Foulds, property manager at Etihad Towers for Real Estate, a development from Shaikh Suroor Projects Department. "The discussions started in the middle of last year and the intention was always to create an exclusive collection of designer stores."

Not that the residential and commercial components are lagging. The development has one commercial high-rise, which has more than 45 per cent occupancy. It is a mix of international and local entities, but the project promoters are not losing sight of those answering to a much smaller profile.

"We are in talks with some of the smaller international companies that are coming here for the first time," said Foulds. "Our office plate can be split into six units of 90 square metres each. We know where the market is and got the pricing structures correct.

"There is a lot of nervousness in the marketplace — if you look at the new companies that entered the Abu Dhabi market last year, the numbers have certainly diminished from those between 2006 to 2010. We are getting interest, but not what we could have expected if this was delivered a decade ago."

Peak

According to Mat Green, head of research and consultancy at CBRE Middle East, "Abu Dhabi's office market is reaching the peak of its development cycle, with significant new supply being completed. This did lead to a decline in office rents during the first quarter, reflecting a 4 per cent decline from the previous quarter. However, rents for "prime" offices remained more stable.

"In the next three years more than 1.5 million square metres of new accommodation could potentially be handed over, adding around half of the total existing stock. As more supply becomes available we expect to see the rental gap widening between prime spaces and inferior products, and those situated in secondary locations."

But with its office occupancy edging closer to the halfway mark, the present represents good going for Etihad Towers. On its part, the development is offering commercial leases of three to 10 years.

"If a tenant signs up for a longer lease, they get additional discounts," Foulds said. "One of the things you hear in the market is that Etihad Towers is too expensive. In reality we are very competitive and on some of the residential units, we are actually cheaper than some of the competition."

The developer is trying to get more through cross-leasing possibilities. "There's a leasing strategy where any tenant that takes up space in the office tower will automatically benefit from a discount on the residential rents," Foulds added.

Apartment units

For the residential towers, of which there are three, leases have been entered into for 60 per cent of 884 apartment units.

Would it have helped if the individual components were delivered through a staggered approach? "The aim was to deliver everything as close together as possible," said Foulds. "One of the areas we focused on very early was for the various elements — more than 464,000 square metres of built-up area — to interact with each other.

"After the usual slowdown during summer, we are expecting a busy September through to the end of the year. If the market changes dramatically, we will [take a second look] at the pricing.

"We never wanted to follow the crowd and the approach was to provide quality real estate that is affordable."