Supply to further pressure Abu Dhabi rents - report

DUBAI. Feb 13,2011 (Reuters) - Office supply in Abu Dhabi is expected to jump by more than 25 percent in 2011, putting further pressure on rents, while oversupply will also push residential and retail rents down, a report said on Sunday.

Vacancy rates for Abu Dhabi's office market, currently around 8.4 percent, are expected to increase as more supply is added, property consultancy Jones Lang LaSalle said.

"Around 1.4 million square metres of office supply is expected to enter the market by 2013," it said in the report.

"While this will address the current shortage of Grade A space, it will lead to significant vacancy emerging."

Total office space across the Abu Dhabi Metropolitan area was around 2.2 million square metres in the fourth quarter.

Rents for premium office space in the United Arab Emirates' capital fell by 9 percent in the fourth-quarter from the previous quarter and were off around 28 percent year-on-year. They have fallen 48 percent from their peaks in the fourth quarter of 2008.

The report did not say by how much further it expects rents to decline.

A property boom in Dubai collapsed at the end of 2008 when it was hit by the global financial crisis and the Gulf state's debt crisis.

Abu Dhabi, home to most of the UAE's oil, weathered the financial crisis better than Dubai but is suffering from oversupply.

"Market conditions in Dubai continue to have a negative impact on Abu Dhabi due to the inter-relationship between the two markets," the report said.

House prices in Abu Dhabi, off some 45 percent, will fall 10 percent in 2011 and a further 5 percent in 2012 according to a Reuters poll in January.

Rents in the capital are set to fall 13 percent and 5 percent in 2011 and 2012 respectively, the poll showed.

The number of residential homes is expected to rise by 23,000 to around 208,000 in 2011 but some of these projects are likely to see further delays, Jones Lang LaSalle said on Sunday.

Average apartment rents were down 14 percent year-on-year in the fourth quarter, with some areas falling by more than 35 percent, the report said.