Investment Ideas: Abu Dhabi
by Anthony Hackney
Abu Dhabi is fast becoming one of the most modern and futuristic cities in the world. With its luxury hotels and great transport links it is easy to explore, and this means you can make the most of its duty free shopping and surprisingly lush green areas, as well as the obvious attractions of great beaches on your doorstep. There is, however, more to this city than meets the eye: it is rich with a history and culture that dates back as far as 3000 B.C. Indeed, great lengths are being gone to in order to promote the maintenance of Abu Dhabi's cultural heritage.
But it is what is happening there right now that is exciting most people, particularly shrewd investors. An unprecedented number of significant developments are underway in Abu Dhabi. The most notable of these are on Reem Island, Saadiyat Island and Yas Island.
On these islands, and elsewhere across the city, it is evident that Abu Dhabi is experiencing a rapid expansion of its property market, both residential and commercial. This increased momentum is demonstrated by the multitude of projected launches and announcements in the local and international press.
Attractions still to come include a Formula 1 Grand Prix circuit; a Guggenheim Museum; the first branch of the Louvre outside Paris; signature hotels; a Ferrari Theme Park; water parks; 300,000 sq m retail areas; golf courses; lagoon hotels; marinas; polo clubs; apartments and villas; and, innumerable food and beverage outlets. There is also enormous investment being made in a 4,000 sq m snow dome, which will feature an European ski village. Abu Dhabi received the Middle East Travel Global Award in 2006, and in 2008 it has been listed by www.expedia.co.uk as one of the top 10 destinations in the world to visit.
There is no lack of evidence that tourism is on an upswing, with the number of tourists increasing year on year. Abu Dhabi Tourism Authority (ADTA) is targeting 3 million tourists by 2015: up from a current figure of 1.4m. These impressive numbers are in stark contrast to the aspirations of Abu Dhabi's sister emirate, Dubai. They are pursuing a total of 10m visitors by 2010. This prompts an interesting comparison: Abu Dhabi is not looking for mass tourism. They are hoping to attract ‘cultural tourists’ who are seeking genuine experiences. A recent research report from Strutt & Parker, a British estate agency that has a new office in Abu Dhabi, suggests that office space will double to 2.7 million square metres by 2013 and rise to 4.5 million by 2020. Retail space will soar from 860,000 square metres today, to 2.8 million by 2013 and 4.7 million by 2020. “There is currently a historic undersupply in all real estate sectors,” says Strutt's UAE director Miles Payne. “At the same time, there's an oil boom and large sovereign wealth funds are adding liquidity to the region.”
www.independent.co.uk
A 2007 report by the HSBC Middle East Equity Research team provided a detailed analysis of the commercial Abu Dhabi real estate market. It demonstrated that rental yields in the office property market in Abu Dhabi are among the world's highest at 8%. It also states that Abu Dhabi is 'significantly undersupplied' with retail property space. This is despite a 220% increase in total retail space since 2000. A large proportion of this space is within the major new shopping centers which have opened in the city.
The situation regarding residential property is much the same. The surge in demand has led to a predicted 25 per cent price increase in the year to late 2008, and a 35 per cent rise in rental value, according to research by the investment bank EFG-Hermes.
“A structural shortage of good quality space across the various types of real estate, combined with pent-up demand and strong immigration growth prospects underpin the supply-and-demand dynamics of the real estate market,” says Sana Kapadia, the report author.
For all of these reasons, as well as many others, property in Abu Dhabi is deemed to be an excellent investment. Couple the unique opportunities available there with the current conditions in the rest of the world, and the choice becomes even clearer.
Anthony Hackney is Managing Partner of Pangaea Estates
For more information on Abu Dhabi and on Pangaea's Abu Dhabi Commercial Property Fund, contact Anthony at:
+971 50 2748509 or +44 777 4515090,
or email him at anthony@pangaea-estates.com