Abu Dhabi’s Office and Industrial Sectors generate Solid Growth in Early 2024

The first quarter of 2024 has seen robust growth in Abu Dhabi’s office and industrial sectors, fueled by sustained economic expansion and targeted investments, according to recent reports by the leading real estate expert Savills on the capital’s office and industrial sectors.

The influx of investors and international professionals has led to heightened demand for commercial office spaces, underscored by a notable 9.1% growth in the non-oil sector and a 3.1% increase in the real GDP in 2023 compared to 2022.

“Abu Dhabi aims to bolster its non-oil economy and establish itself as a significant player in global manufacturing. Government programs like the industrial sector strategy and the ‘Make it in Emirates’ initiative have facilitated business expansion by providing financing, incentives, and support,” Stephen Forbes, the Savills head of Abu Dhabi.

Significant growth was observed in Abu Dhabi’s office market in the first quarter, driven by an increase in non-oil economic activities, which comprised 52.8% of the total economy in 2023.

The non-oil GDP experienced a 7.7% surge in the third quarter of 2023, primarily caused by the manufacturing and construction sectors, which contributed over 17% and 16.3% respectively.

The demand for high-grade commercial office space remains strong, with prime properties like the Abu Dhabi Global Market (ADGM) and International Tower reaching approximately 95% occupancy rates.

ADGM alone reported a 32% increase in operational firms and a 22% rise in workforce numbers in 2023, mirroring the escalating demand for office spaces.

Key areas such as Maryah Island, Capital Centre, Masdar City, and Al Raha are continuously drawing interest due to their exceptional connectivity, infrastructure, and construction quality.

Savills noted a shortage in Grade A office assets in the market, with high occupancy levels driving up rental rates. However, projections show that over 90,000 sqm of new office space will be available by 2026, with significant developments like The Link Masdar City and HB Office Tower underway.

Furthermore, ADGM’s expansion to Al Reem Island and new developments on Saadiyat Island are anticipated to satisfy the increasing demand for premium office spaces by 2027.

Overall, rental rates across various micro-markets saw a 1% quarter-on-quarter growth, with some prime locations experiencing a 7% annual increase.

In the industrial rental sector, Abu Dhabi continues to show strong performance, supported by governmental strategic initiatives like the Industrial Sector Strategy and the ‘Make it in Emirates’ initiative.

The non-oil sector’s robust 9.1% growth significantly contributed to a 3.1% rise in the real GDP in 2023.

Small and Medium-sized Enterprises (SMEs) play a crucial role in this growth, accounting for approximately 98% of businesses and contributing over 42.8% to the non-oil GDP.

The Abu Dhabi Department of Economic Development (ADDED) observed a 51.5% increase in industrial licenses issued in 2023, with the total capital of new companies surpassing AED 210.7 billion ($57.3 billion).

Key sectors including finance, insurance, construction, and transportation have notably expanded their contributions to the non-oil GDP.

Michael Fenton, Director of Industrial & Logistics at Savills Middle East, said: “Abu Dhabi is positioned as a global manufacturing hub, and the robust growth in the non-oil economy and the increasing demand for top-tier industrial and logistics facilities underscore the emirate’s commitment to fostering a business-friendly environment.”

Industrial space rental rates in Abu Dhabi increased by 2% quarter-on-quarter, with high-specification locations in ICAD 1 and Kezad witnessing a significant 14% year-on-year rise.

Facilities featuring advanced amenities like temperature control continue to garner premium rents, Fenton noted.

He also highlighted the consistent strong demand for industrial and logistics spaces in areas such as ICAD, Mussafah, and Kezad.

Kezad, strategically located between Abu Dhabi and Dubai and near Khalifa Port, continues to attract significant occupier interest. The sector is expected to grow further with ongoing construction projects adding nearly a million sqft of space in Mussafah, ICAD, and Al Markaz.

“Kezad Group is investing AED621 million in developing 250,000 sqm of warehousing capacity by the end of 2025,” noted Fenton.

“Aldar is also expanding its logistics asset, ADBH, by 33,000 sqm, with full occupancy expected by major firms such as Etihad and Mubadala,” he added.