Abu Dhabi’s Office and Industrial Sectors Showcase Robust Growth Amid Economic Expansion

Abu Dhabi has experienced a thriving first quarter in both the office and industrial sector, driven by steady economic growth and strategic investments, as per two latest reports by Savills on the capital’s office and industrial sectors. Investors and foreign professionals continue to flock to the capital, leading to increased demand for commercial office space, which was reflected by a strong non-oil performance of 9.1% and real GDP, which increased by 3.1% 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 programmes like the Industrial Sector Strategy and the ‘Make it in Emirates’ initiative have facilitated business expansion by providing financing, incentives, and support,” Stephen Forbes, Savills head of Abu Dhabi, commented.

Office Sales and Rental Market

Abu Dhabi’s office market saw notable growth in Q1 2024, fuelled by the emirate’s expanding non-oil activities, which accounted for 52.8% of the total economy in 2023. The non-oil GDP surged by 7.7% in Q3 2023, primarily supported by manufacturing and construction activities, contributing over 17% and 16.3%, respectively.

The demand for commercial office space has been robust, with Grade A office assets such as Abu Dhabi Global Market (ADGM) and International Tower achieving around 95% occupancy. ADGM alone recorded a 32% increase in operational firms and a 22% rise in the workforce in 2023, reflecting the growing demand for office spaces. Key locations such as Maryah Island, Capital Centre, Masdar City, and Al Raha continue to attract interest due to their superior connectivity, infrastructure, and build quality.

The office market faces a shortage of Grade A assets, with high occupancy rates driving rental increases. However, over 90,000 sqm of new office space is expected by 2026, with major projects like The Link Masdar City and HB Office Tower in the pipeline. Additionally, ADGM’s expansion into Al Reem Island and new developments on Saadiyat Island are set to meet the rising demand for prime office spaces by 2027. Overall, rental growth across micro-markets was recorded at 1% quarter-on-quarter, with select prime locations seeing a 7% rise year-on-year.

Industrial Rental Market

Abu Dhabi’s industrial sector continues to thrive, bolstered by strategic initiatives such as the Industrial Sector Strategy and the ‘Make it in Emirates’ initiative. The non-oil economy demonstrated robust growth of 9.1%, contributing to a 3.1% increase in the real GDP in 2023.

Small and Medium-sized Enterprises (SMEs) are pivotal in this growth, making up approximately 98% of businesses and contributing over 42.8% to the non-oil GDP. The Abu Dhabi Department of Economic Development (ADDED) reported a 51.5% increase in industrial licenses issued in 2023, with new companies’ total capital exceeding AED 210.7 billion ($57.3 billion). Key sectors such as Finance and Insurance, Construction, and Transportation have significantly expanded their contributions to the non-oil GDP.

Michael Fenton, Director of Industrial & Logistics at Savills Middle East, added, “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.”

Rental rates for industrial spaces in Abu Dhabi rose by 2% quarter-on-quarter, with high-specification assets in ICAD 1 and KEZAD experiencing a significant 14% year-on-year increase. Buildings with advanced features like temperature control continue to command premium rents.

The demand for industrial and logistics space remains strong, particularly in locations like ICAD, Mussafah, and KEZAD. KEZAD benefits from strategic positioning between Abu Dhabi and Dubai and proximity to Khalifa Port, attracting significant occupier interest. The sector is set to grow further with ongoing construction projects adding nearly a million sqft of space in Musaffah, ICAD, and Al Markaz. KEZAD Group is investing AED 621 million in developing 250,000 sqm of warehousing capacity by the end of 2025. Aldar is also expanding its logistics asset, ADBH, by 33,000 sqm, with full occupancy expected by major firms such as Etihad and Mubadala.