Office space demand slips in Abu Dhabi

The number of companies looking to take office space in Abu Dhabi fell slightly at the end of 2014 as oil prices plummeted and uncertainty increased around infrastructure projects.

In a report to be published today, the property broker Knight Frank said that inquiries for office space fell “marginally” in the second half of last year as companies that had hoped to win lucrative infrastructure contracts in the capital put their requirements on hold.

After hitting about $115 per barrel in the middle of last year, oil prices tanked to below $50 in January.

With about 51 per cent of Abu Dhabi's GDP dependent on the oil and gas sector, the capital is far more exposed than neighbouring Dubai to short-term oil shocks, Knight Frank UAE said.

Large publicly funded, infrastructure-related schemes tend to stimulate construction activity, and support growth across the real estate sector in the emirate.

So if many of these projects are put on hold, the effect on the city could be significant.

“What we are seeing is a slowdown in the amount of office take up in Abu Dhabi,” said Matthew Dadd, real estate director at Knight Frank UAE.

“At the moment our clients don’t know themselves whether a lot of these lucrative infrastructure projects they had hoped to win have been cancelled or put on hold or on a go-slow — or if they will go ahead as originally intended.

“But for them it is all about headcount based around the amount of work they can expect to win,” he said.

“And the oil price situation is prompting them to put off decisions about taking new office space.”

Nonetheless, Knight Frank said that oil and gas producers accounted for the greatest amount of new office space leased in Abu Dhabi during 2014, comprising 16 per cent of all new office take-up.

Government sectors accounted for the second-highest amount of new office leases in the capital, with another 15 per cent.

The main demand for offices was between 100 square metres and 500 sq metres, with nearly 80 per cent of inquiries within this size range, the broker added.

According to Knight Frank, prime office rents in Abu Dhabi in the second half of last year remained at about Dh1,800 per sq metre, while rental values for Grade A shell and core office space stood at Dh1,200 per sq metre.

lbarnard@thenational.ae

Follow The National's Business section on Twitter