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ABU
DHABI
MARKET
UPDATE
2020/2021

ABU DHABI
MARKET SNAPSHOT
2020/2021
As with the wider UAE market, Abu
Dhabi’s economy and real estate market
saw the lingering impact of COVID-19
and contractions in household income
weighing down upon sales and rental
demand. However, Abu Dhabi’s economy
has been relatively resilient during 2020
due to previous optimisation measures
taken over the last few years, particularly
in the hydrocarbon and banking sectors.
Interestingly, in 2020 residential prices and rents
displayed stability, particularly for superior built
residential stock as prices were already at cyclical
lows with little room for further contraction. In
fact, a few established residential districts saw
green shoots of recovery over Q4 2020. Whether
this interim uptick will be sustained over 2021 will
inherently depend upon the overall buoyancy of the
economy.
On the other hand, the Abu Dhabi office market
continues to face consolidation and flight to quality
as rents and occupancy levels come under further
downward pressure, particularly in the Grade B and
C market. Occupiers are increasingly taking the
view of mitigating risks and encouraging staff to
return to the workplace in a safer built environment
without necessarily incurring an increase in rental
outflow. This occupier preference has focused most
transaction activity in superior managed Grade A
and single owned assets, therefore the limited Grade
A market continues to show resilience.
While brick & mortar retail and hospitality sectors
continue to face headwinds in the wake of COVID-19,
This publication
This document was published in February 2021. The data used in the charts and tables is the latest available at
the time of going to press. Sources are included for all the charts. We have used a standard set of notes and
abbreviations throughout the document.
FOREWORD
we have seen other asset classes such as retail
logistics and warehousing perform surprisingly well
as occupier behaviour adjusted to the new normal of
increased online retail.
That said, Ghadan 21 - Abu Dhabi’s AED 50 billion
accelerator program offered stimulus packages,
rebates and waivers on various government fees in
2020 including no real estate registration fees and a
20% rent rebate for F&B, tourism and entertainment
facilities, thus supporting businesses. Furthermore,
with the recently announced 100% ownership of
businesses by foreign nationals coupled with a range
of other government-led demand drivers, there
appears to be a broad consensus that the emirate
is expected to see a potential uptick in market
sentiment in 2021.
With Aldar expanding its portfolio with the
development and asset management of projects for
the Abu Dhabi government and the steady rise in
its stock value, it is now the UAE’s largest developer
- further boosting the overall market sentiment of
Abu Dhabi.
With the residential market showing initial signs of
stabilisation and the performance of the real estate
sector broadly tied to the wider economy, which
is being boosted by effective stimulus measures,
changes in citizenship laws and record high
vaccination rates, we foresee Abu Dhabi’s real estate
sector to be relatively resilient over 2021.
ABU DHABI MARKET UPDATE 2020/2021

RESIDENTIAL Sales Market Average Villa Sale Prices 2019 vs. 2020

MARKET
1,400
For the first time in five years, average villa sales
prices witnessed a 2% year on year increase, 1,200
however, apartment prices saw a nominal -4%
drop, albeit because of limited transaction 1,000

Sales Price in AED / sq. ft.

activity as buyers took a wait and see approach,
making prices appear to be relatively stable. 800
Supply Abu Dhabi also saw the common theme that
is being reflected in most markets post the 600

There were over 4,500 units delivered pandemic, with larger units and villas witnessing
400
in Abu Dhabi over 2020 with most higher demand as occupiers adjust to lifestyle
handovers located in Al Raha Beach, Al requirements. This has translated into a rise of
200
Reem Island and Yas Island. The most 3.5% quarter-on-quarter in average villa asking
prominent deliveries were apartments prices over Q4 2020. 0
in The Bridges by Aldar and villas in Yas Al Reef Al Raha Ghadeer Golf Hydra Saadiyat
Acres Phase 1. Prices in various communities such as Al Raha Villas Gardens Villas Gardens Village Island

Beach, Yas Island and Saadiyat Island appear to 2019 2020

The Abu Dhabi market historically has had
relatively lower levels of supply handovers
each year, however, 2021 is expected to
witness a spike with over 7,000 units
slated to be handed over. A significant
be buoyant, indicating a preference for newer
and quality build products. While the market
remains price sensitive, we continue to see a Average Apartment Sale Prices 2019 vs. 2020
flight to quality and affordability from both end-
users and investors. Softening market conditions 1,400

portion of the new supply projected for
2021 is expected in Al Reem Island and
Al Raha Beach which are witnessing
substantial development activity followed
by Yas Island.
have resulted in both homebuyers and tenants
1,200
having more bargaining power when negotiating
sales terms.
1,000
Developers continued to spur sales through

Sales Price in AED / sq. ft.

800
various incentives and offers, including
While the number of actual handovers attractive post-handover payment plans and 600
may be slightly lower, we expect existing fee waivers while also partnering with banks to
and future inventory to face further provide buyers access to preferential mortgage 400
absorption challenges given the current rates.
economic climate of subdued demand. 200
While Covid-19’s impact will continue to affect
demand, we expect the market to show early 0
Al Al Al Al Reef Marina Saadiyat Sun and The
signs of recovery in 2021 with the pace of price Muneera Zeina Bandar Downtown Square Beach Sky Gate

Abu Dhabi Residential Supply reductions stabilising provided the broader Residences Towers

economy recovers. 2019 2020

300 Source: CORE Research

250 Abu Dhabi Sales Price Index

Number of Units in Thousands

1,500

200
1,300

150 Sales Price in AED/sq. ft. 1,100

199 211 223 236 246 251 256 261 264 269 269 900
100
700

50 500

300
0 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov
16 16 16 16 16 16 17 17 17 17 17 17 18 18 18 18 18 18 19 19 19 19 19 19 20 20 20 20 20 20
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E

Existing New Supply Villa Sales Price Index Apartment Sales Price Index
Source: CORE Research Source: REIDIN, CORE Research

4 core-me.com/research core-me.com/research 5
 ABU DHABI MARKET UPDATE 2020/2021

Rental Market Average Two Bed Apartment Rentals

2019 vs. 2020
As a result of job losses, salary cuts and 160
household income contraction, many tenants 140

Annual Rents in thousands AED

relocated or repatriated, thus putting continued 120
downward pressure on the rental market. 100

80
That said, we witnessed a relative level of
60
stability in average rents in the villa market
40
with only a 3% year-on-year drop as rents
started to stabilise over H2 2020, particularly 20

for well-developed villa communities in Yas 0 

Al Raha Saadiyat Beach
Island, Al Raha Gardens and Saadiyat Island. Al Reef
Villas
Al Reem
Island
Khalifa
City A Beach Residences
This resilience stems from the rising demand
2019 2020
for properties with more open space, gardens
and swimming pools due to work from home
demands. Furthermore, many tenants are Average Three Bedroom Villa Rentals
looking to move away from apartment living as 2019 vs. 2020
they are hesitant to share common areas with 400

other residents. With many occupiers continuing 350

Annual Rents in thousands AED

with hybrid workplace strategies, requirements 300

for larger, more open residential space may 250
continue over H1 2021. 200

150
While average apartment rentals displayed
100
a 5% year-on-year drop, the older stock has
50
witnessed further reductions as tenants
relocated to superior buildings at similar 0
Al Reef Golf Al Raha Hydra Saadiyat Beach
or lower rentals. Furthermore, many of the Villas Gardens Gardens Village Villas

better build and newer apartment complexes 2019 2020

have seen continued softening over the last
few years and now have limited room for
further reductions. Therefore, it is important
Villas Gross Apartments
to note that while rental reductions may show
lower year-on-year changes, various landlord 5.5% Yield 6.9%
incentives such as rent-free periods, a higher
number of cheques and other forms of flexibility
are supporting headline rentals. Source: CORE Research

Abu Dhabi Rental Price Index

110

100

90

80
Annual Rents in AED/sq. ft.

70

60

50

40

30

20
Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov
16 16 16 16 16 16 17 17 17 17 17 17 18 18 18 18 18 18 19 19 19 19 19 19 20 20 20 20 20 20

Villa Rental Index Apartment Rental Index

Source: REIDIN, CORE Research

6 core-me.com/research core-me.com/research 7
 ABU DHABI MARKET UPDATE 2020/2021

OFFICE MARKET INDUSTRIAL AND WAREHOUSING

Most of the office demand in Abu Dhabi came
from relocations where occupiers moved to similar-
sized offices largely to upgrade to superior grade
buildings at similar or lower rental outflows as they
took advantage of softened rentals. Many tenants
also consolidated offices spread across multiple
locations or floors within the same building to a
single level office. Most office movement stemmed
from large occupiers in the oil & gas sectors,
government and semi-government entities and
ranged between 500 to 2,000 Sq.m.
Although the office market in the capital continues
to face challenges, we have seen the impact of
COVID-19 further heighten the trend of flight to
quality with tenants looking to move to superior
managed and built properties to bolster employee
confidence and safety while not significantly altering
cash outflows.
Abu Dhabi’s industrial and warehousing sector
defied market conditions with both enquiry and
transaction levels seeing an increase in 2020. The
negative impact of COVID-19 that was felt in other
sectors with a slowdown in demand was reversed
in the case of the warehousing sector. With online
retail gaining significant market share over the
last few months, we have seen rising demand for
warehousing space from both online and brick and
mortar retailers as they expand their offerings to
cater to increasing online demand.
In other industrial sectors, apprehension of
further supply chain disruptions are also fuelling
Abu Dhabi Warehousing Lease Rates 2019 vs. 2020
600
occupiers to store stock, thus requiring more space,
particularly for essential and non-perishable goods.
We have seen ICAD and Mussafah rentals hold
steady year-on-year due to limited availability of
stock while KIZAD is also taking a more active role
in managing leasing and maintaining occupancies.
Notably, Mussafah is witnessing a steady demand for
warehouses with tenants also requesting the option
of office space within the same facility, thereby
enabling occupiers to consolidate operations and
warehousing requirements into a single premises
and for smaller enterprises to test market conditions
and expand as they scale up operations.

Office tenants are becoming increasingly aware 500

Rents in AED / sq.ft. / Annum

of the importance of building maintenance and
facilities management. Most Grade A buildings 400
which are largely single owned have been proactive
300
with increased COVID-19 risk mitigation protocols
including visitor security, thermal screening, frequent
200
cleaning and disinfecting measures and building
management protocols for COVID-19 positive 100
cases, etc. Such stringent measures are generally
missing in Grade B and Grade C buildings. As rents 0
have softened across grades, the advantage of Abu Dhabi Mussafah ICAD ICAD 2 KIZAD Al Markaz Al Mafraq
moving into a Grade A building is multi-fold - from Airport Free
Abu Dhabi Office Rental Range 2019 vs 2020 a financial as well as user experience and safety Zone
2019 2020
perspective.
Source: CORE Research
2000
Maximum This pivot from occupiers towards Grade A space
1750
Minimum
has led the limited Grade A stock in Abu Dhabi to
display relative resilience in occupancy and rents.
1500
With most of the office stock in Abu Dhabi being
Grade B and C, we are witnessing a significant drop
Rents in AED / sq.m / Annum

1250
in rents and occupancy levels in this segment as
most tenants look to relocate. With landlords being
1000
pushed further to offer better terms in the aftermath
of COVID-19 making the market notably tenant-
750
friendly, rent-free periods, rental deferrals, multiple
check payments and contribution to fit-outs are
500
becoming increasingly common. Established tenants
with strong cashflow are looking to lock-in longer
250
lease terms to take advantage of the commercial
terms being offered in the current market. We
0
expect these trends to continue over to H1 2021 as
Prime / Grade A Grade A in Grade B
the market continues to adjust to ongoing economic
Grade A+ Secondary conditions.
Areas

Rental Range: 2019 2020

Source: CORE Research

8 core-me.com/research core-me.com/research 9
 ABU DHABI MARKET UPDATE 2020/2021

RETAIL MARKET
Abu Dhabi’s retail market has been the most
challenging asset class even before the onset of the
COVID-19 led market slowdown. The contraction in
household income and relative hesitation to shop in
physical stores continues to negatively impact the
retail sector. That said, over the last few months we
have seen an uptick in footfalls with a particularly
active winter season. Also, a few luxury retailers
have seen steady demand as many HNI consumers
shopped locally as travel restrictions inhibited them
from visiting other international cities. While the
push towards online retail has been gradual over the
last few years, the pandemic has accelerated the
acceptance of this format amongst buyers. We have
seen many retailers significantly increase their online
presence and scale-up back-end operations and
logistics to accommodate this shift.

We have also witnessed community retail and

smaller ground-floor retail outlets perform relatively
well as they largely cater to essential retail. While
there are many government and landlord led
incentives, mall retail continues to face challenges
as retailers look to optimise footprint and reduce
costs across the retail group/portfolio. For retailers,
rents form only a portion of the cost with staff and
merchandise accounting for larger costs, pushing
brands to further strategize locations to maximise
exposure and sales.
With retailers facing lower footfalls, most are turning
to revenue share models to withstand market
conditions. Landlords are also being perceptive to
these conditions and realising that rent deferrals
may not be a viable solution and are open to
revenue share models to maintain occupancy and a
good retail tenant mix.
The future of malls will highly depend upon
responsive mall owners providing retailers rental
incentives to last these tough market conditions
while also creating innovative customer engagement
initiatives to retain shopper interest. We forecast
the super-regional malls to fare better in this
regard while older and smaller malls face increasing
challenges and more store closures.
Retailers will need to have greater synergy between
their brick and mortar and online offerings to stay
relevant to changing and increasingly demanding
shopping behaviour.
In terms of retail supply, there were no major retail
handovers in 2020 with Reem Mall expected to
be handed over by the end of 2021, adding over
270,000 Sq.m. of retail GLA.

Total Gross Leasable Area

3.5

2.5
Million Sq.m

1.5

.5

0
2014 2015 2016 2017 2018 2019 2020 2021E

Existing New Supply

Source: CORE Research

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ABU DHABI MARKET UPDATE 2019/2020

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