Abu Dhabi office rents are down 30 per cent from a year ago, according to new data.
That includes an 8 per cent drop since the end of last year, the property consultant Cushman & Wakefield said in its latest report released yesterday. New buildings are competing for companies and driving down rents, it said.
The slide in prices is "definitely going to continue", said David Quinn, the head of the UAE operations for Cushman & Wakefield.
More than 500,000 square metres of space is due to come on line this year, including the 24-storey International Tower in Capital Center, and Sowwah Square, part of the new Sowwah Island business district.
With the lack of availability no longer a factor, office rents in Abu Dhabi should eventually reach parity with Dubai, where rents average between Dh1,280 (US$348.48) and Dh1,900 a sq metre. .
Abu Dhabi office rents currently range from about Dh1,300 to Dh2,300 a sq metre. Rents for top space in Abu Dhabi are likely to fall closer to Dh1,800 a sq metre.
"Realistically, all things being equal, why should Abu Dhabi trade at a premium," Mr Quinn said. "I see no reason why Abu Dhabi wouldn't settle at similar levels of Dubai."
The highest quoted rents in Abu Dhabi are in the Tourist Club area, where landlords are asking for Dh2,300 a sq metre, compared with Khalidya, where rents are closer to Dh1,400 a sq metre. But landlords often offer 10 per cent discounts and are "becoming increasingly flexible on rent-free periods and lease terms", according to Cushman & Wakefield.
Many companies are still waiting on the sidelines for buildings to finish and rents to drop, analysts say.
"Many occupiers remain reluctant at this point to commit to a major relocation until the first phases of the major office developments come to the market," Cushman & Wakefield said.
"Location, location, location," may be the universal mantra in property but not in the Abu Dhabi office market.
Conditions vary from building to building, as Abu Dhabi has "yet to become fully defined in terms of standard commercial rental practices", Cushman & Wakefield said.
Service charges "vary widely from building to building", the property firm found. Some landlords include service charges in rent while others tack on an additional charge between 5 and 15 per cent of the annual rent.
In many ways, Abu Dhabi still differs from international markets. The typical office lease is one to three years and rent increases are capped at no more than 5 per cent a year.
The market remains "fragmented" with Sowwah Island emerging as a new central business district for financial and legal firms, while engineering and energy companies gravitate to other pockets of office space, Mr Quinn said.