According to Mat Green, associate director of research and consultancy at CBRE, Middle East, office leasing and sale transactions remain low and prime rents continue to drop.

Prices reached Dh2,600 per square metre per annum, 45 per cent lower than the peak prices offered in 2008. Some areas are still offering Dh3,000 per square metre annually.

"Demand has remained on the smaller office units ranging between 200-600 square metres," says Green.

Advantage

This works to the advantage of investors and tenants who now have a wider choice. However, despite low rates, landlords are still finding it hard to attract tenants or buyers.

The vacancy rate for office accommodation remained at 2 per cent in fourth quarter 2009. "This rate is predicted to increase with upcoming stock and weaker demand for office accommodation," says Green.

"Commercial real estate in Abu Dhabi is driven by business confidence. As such, despite a shortage of supply and many businesses currently being located in non-fit-for-purpose premises, there has not yet been a "flight to quality" for commercial office space by business owners. However as new commercial office towers are completed and physical occupation will be possible, I believe this will be the time when demand will rapidly increase for this asset class," said Guy Alan Sadler, CEO of Profile Group Properties.

New business

Amendments to the commercial law reducing the level of capital required to start a business encouraged a rise in new businesses in recent months.

This expanded the number of potential tenants which is predicted to fuel demand for commercial space in the short and long term.

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