With the exception of the retail sector, there is a much more modest level of supply forecast over the next two years. Image Credit: Supplied

Although Abu Dhabi’s real estate sector has remained subdued in the first quarter, the market is responding positively to challenging conditions. Craig Plumb, head of research at JLL Middle East and North Africa, highlights government actions and developer initiatives in the current situation. What are the positive signs in the market right now?

Levels of new supply have fallen to below historic levels in the hotel, office and residential sector as developers have adjusted their delivery schedules. This is helping to sustain prices for good-quality projects. Also, the government is continuing to promote the market through increasing expenditure and investment — we are seeing interest from a number office occupiers who see the long-term growth potential in Abu Dhabi and are therefore seeking to take advantage of the current weakness in the market to negotiate leases or trade up into better-quality premises.

Another positive for the market has been the government’s move to reduce fees and relax existing regulations. There have been examples of these initiatives in the hotel, office and residential sector. The government has reduced its fees and charges for hotel guests, has relaxed the regulations for the establishment of new companies and has recently announced that foreign investors will have the same rights to own freehold land as in Dubai.

Further evidence of the continued demand for residential property in Abu Dhabi is the ability of Aldar to sell all the villa plots in its new project on Yas Island that were launched at Cityscape Abu Dhabi last week.

The hotel market has been the strongest sector of the Abu Dhabi, recording a marked improvement in performance during the first quarter. While this was primarily due to a number of major events boosting demand in quarter one, there has also been a slowdown in the level of additional hotel rooms entering the market, whic will contribute to the long-term health of this sector of the market.

Are developers more conscious about what they are planning and delivering?

Yes. This is reflected in both the reduced number of completions and nature of projects, which are now closely aligned with demand. In the residential market projects are now being targeted at the more affordable sector. Also there are more modest levels of supply forecast over the next two years.

In Abu Dhabi what does the supply look like in the next one year?

With the exception of the retail sector, there are much more modest levels of supply forecast over the next two years. This is the big difference between the Dubai and Abu Dhabi markets currently. While there remains very high levels of completions scheduled for the next few years in Dubai, this is certainly not the case in Abu Dhabi, where developers have adjusted their future supply downwards by delaying some projects and scaling back the size of others.

Do you think Abu Dhabi will feel the Expo effect?

Yes — while not as directly as Dubai, Abu Dhabi will also benefit from the increased exposure and higher level of international visitors attracted by Expo 2020. We are already seeing developers in Dubai target their project at these visitors and the same trend is likely to occur in Abu Dhabi.