Hundreds of small businesses working out of villas in Abu Dhabi will have to relocate under new city regulations.
The initiative will free up parking spaces and help to fill new office towers under construction. But it will also create a financial burden on businesses that will be forced to move.
"We are facing a lot of trouble," said Khalid Walid Ghannam, the general manager of Quatro Group, which operates restaurants and cafes.
His company received a notice to move out of the villa in Khalidiyathat it uses for offices. The company will probably have to pay 20 per cent more in rent, in addition to moving expenses to transfer 20 employees to a new location, Mr Ghannam said.
The city has traditionally allowed commercial businesses to operate in villas, as long as the villas were designated for business use. But complaints about parking and traffic in residential neighbourhoods have prompted the new regulations, according to the Municipality of Abu Dhabi.
"A prerequisite to the exercise of commercial activities is that they shouldn't cause a nuisance for residents of the area … do not cause noise or traffic jams, and are not of an administrative nature," said Owaida al Qubaisi, the acting executive director of municipal services.
"The presence of the activity must be compatible with the architecture of the area and must conserve the general appearance of the capital," he said.
The Municipality and the Department of Economic Development have not formally announced the changes. However, business owners are already starting to receive notices of the new regulations.
"The intention is that all businesses are moved out of residential properties into suitable commercial premises, in areas designed to accommodate business," said Tara Marlow, the head of property and hospitality for the Abu Dhabi office of Al Tamimi & Company, a law firm.
The changes will happen gradually. New businesses will not be registered if they plan to use a villa for their operations and existing businesses working out of villas will not be able to renew their licences, said Ms Marlow, who has been gathering information on the regulations.
Businesses will be offered a grace period of a year, as long as they agree to relocate to a commercial building before the next licence renewal period.
A few operations will be exempt from the new regulations, including clinics, spas and salons, children's nurseries and senior care homes, Ms Marlow said.
Other small businesses may be looking at an expensive and complicated move. Many have spent thousands of dirhams to outfit villas with formal lobbies and other business-oriented facilities.
Kfak General Contracting had invested Dh500,000 (US$136,128) to renovate and furnish a villa that it shares with Atelier 6, a consultancy, said Ahmed Alsayed Morsy Serour, the general manager of Kfak.
The company has operated out of the villa for two years but was told its licence would not be renewed in September unless it moved to traditional office space.
The initiative, however, should help landlords of local office buildings, who are eagerly searching for tenants for several office complexes under construction. The amount of space available in Abu Dhabi is set to grow by 50 per cent in the next two years, with 540,000 square metres scheduled for completion this year alone.
"The decision by the Abu Dhabi Municipality and the Department of Economic Development to ban commercial occupiers from operating out of villas and other perceived residential premises is likely to drive increased demand for office space," the property consultancy CB Richard Ellis (CBRE) noted in a recent report.
Although most of the small businesses will be focused on Grade B office space rather than the flashy new towers, "we will probably see more local churn in the market" as companies look for new space, said Matthew Green, the head of research and consultancy for CBRE Middle East.
Some businesses operating in villas contacted by The National had not heard about the new regulations.
"No one likes moving," said Yahya Atassi, the chief executive of Hannover Consulting Engineers, which operates out of a refurbished villa near the Corniche. "But if we have to do it, we have to do it."