Abu Dhabi’s construction and real estate sectors posted a strong performance in 2022, reflecting the overall positive growth in the emirate. Construction grew by 7.6% to Dh86bn ($23.4bn), contributing 7.8% to Abu Dhabi’s GDP and solidifying its position as one of the most important non-oil sectors of the economy. Concurrently, real estate has seen a flurry of activity, marked by an 8.5% increase in the value of transactions in 2022, coupled with a 27.2% rise in the number of transactions over the same period.
Several highly anticipated projects have recently been launched or are under construction, with a flush of new housing developments in areas such as Al Raha Beach and Yas and Al Reem Islands set to add to the international appeal of the market. Businesses in the emirate continue to exhibit a high degree of confidence, creating a favourable climate for potential investment in the industry.
Structure & Oversight
Abu Dhabi’s construction and real estate sector is governed by both emirate-level and federal laws and agencies. These include the national Civil Transactions Law, which allows moveable property to be secured by a pledge and includes provisions related to work contracts, as well as the Abu Dhabi Building Law, initially enacted in 1983, which regulates building works.
Since 2015 the Department of Municipalities and Transport (DMT) has held the central authority for overseeing the sector. The DMT exercises comprehensive supervision over all dimensions of the industry, collaborating with municipalities, granting licences, managing escrow accounts and possessing the power to terminate real estate projects when deemed necessary. All real estate developers in Abu Dhabi must register with the DMT in order to participate in the sector. Entities authorised to engage in development-related activities include master developers and subdevelopers, brokers and their employees, owners’ association managers, appraisers and surveyors. Businesses operating in the emirate are obligated to obtain a licence by the Abu Dhabi Department of Economic Development, which oversees a business centre to expedite commercial processes. Additionally, construction companies, developers and contractors may require consent from municipalities, the Environment Agency – Abu Dhabi or the DMT to carry out civil works.
The DMT also provides a unified online platform for Abu Dhabi real estate known as Dari. Launched in February 2022 to improve transparency, the platform is a joint effort between the DMT and Advanced Real Estate Services, a software firm based in Abu Dhabi. The system incorporates services for clients, organisations and real estate professionals to purchase, sell and lease real estate, and provides users with a directory of licensed real estate professionals. Accompanying this is access to Tawtheeq, a system for regulating tenancy contracts in Abu Dhabi, as well as documentation and real estate certificates. It also includes a dashboard to help investors explore real estate investment opportunities.
Trends & Investment
The Abu Dhabi Economic Vision 2030 is the emirate government’s blueprint for developing the local economy and diversifying away from hydrocarbons by 2030. Within this strategic roadmap is a clear acknowledgement of the considerable concentration of employment in construction and government services, both of which are perceived as having relatively low levels of productivity. Furthermore, the vision underscores the critical importance of increasing the proportion of jobs associated with higher-value-added industries with the aim of elevating overall productivity. Notably, the plan highlights a reform permitting foreign property ownership and identifies the real estate sector as a major potential source of demand.
There are no restrictions on UAE nationals owning property in the emirate under the Abu Dhabi Real Estate Law. Since April 2019 foreigners have been permitted to own freehold property in designated investment areas in Al Reef, Golf Gardens, Mangrove Village, Al Raha Beach, Al Bandar, Al Zeina, Al Manara and Al Reem Island in Abu Dhabi City. Foreigners may seek exemptions to invest in property outside of these areas on an individual basis.
As part of the UAE government’s increasing commitment in recent years to combat money-laundering and financial crimes, the federal Ministry of Economy and Ministry of Justice, in partnership with the UAE Financial Intelligence Unit (FIU), introduced new reporting requirements for real estate transactions in August 2022. Real estate agents, law firms and brokers are now obligated to report to the FIU any transactions that involve cash payments equal to or exceeding Dh55,000 ($15,000), all transactions involving the use of a virtual asset, as well as payments or funds derived from a virtual asset. Governance of the sector has generally proven effective, and on a global scale these measures have helped Abu Dhabi advance in the Global Real Estate Transparency Index published by international real estate services company JLL. In 2020 Abu Dhabi ranked 48, and it advanced to 45 in the 2022 edition of the index.
Performance & Size
The real estate sector performed well in 2022 and the first quarter of 2023 on the back of strong post-Covid-19-pandemic demand. According to data from Statistics Centre – Abu Dhabi (SCAD), the emirate’s GDP expanded by 9.3% to Dh1.1trn ($299.4trn) in 2022, making it the fastest-growing economy in the MENA region (see Economy chapter). Real estate activity increased by 17.1% compared to 2021. In contrast, the construction sector showed slightly slower growth than the economy as a whole, up 7.6% to Dh86bn ($23.4bn), contributing 7.8% to Abu Dhabi’s GDP.
According to UK-based analytics firm Global Data, the UAE’s construction market is projected to record an average annual growth rate of more than 3% between 2024 and 2027. Across the UAE, workers in the construction industry were paid a total of Dh29.8bn ($8.1bn) in 2019, the latest year for which records are available, up 1.2% from 2018. The compensation of construction workers was equivalent to 3.3% of UAE’s GDP, higher than any other labour force except public administration, defence and compulsory social security.
In 2022 the DMT recorded 19,033 real estate transactions, valued at Dh77.6bn ($21.1bn). This consisted of 9010 sales transactions worth Dh23.5bn ($6.4bn) and 10,023 mortgage transactions valued at Dh54.1bn (14.7bn). This represents growth of 8.5% in the value of transactions and an increase of 27.2% in the number of transactions compared to 2021.
The three areas with the most activity were Yas Island, with Dh4.2bn ($1.1bn); Al Reem Island, with Dh3.4bn ($925.5m); and Saadiyat Island, with Dh3.1bn ($843.8m). The positive momentum continued into 2023, with Abu Dhabi experiencing a significant increase in real estate sale transactions in the first quarter of 2023, according to data by Property Finder. The cumulative value of sales transactions in Abu Dhabi reached Dh11.6bn ($3.2bn) in the first three months of 2023, an increase of 219% compared to the same period the previous year.
In terms of foreign direct investment (FDI), inflows to Abu Dhabi’s real estate sector grew by 363% yearon-year (y-o-y) in the first half of 2023, reaching Dh834.6m ($227.2m). The regions that attracted the highest shares of real estate FDI were Saadiyat Island (34%), followed by Yas Island (28%), Al Jurf (12%), Al Reem Island (11%) and Al Shamkha (8%).
Building Materials
Construction costs grew by 3.2% in 2022, according to data from SCAD, although expenses began to decline slightly in the third and fourth quarters. Equipment, mechanical works for air conditioning and construction materials saw the biggest jumps with increases of 28.8%, 17.7% and 16.3%, respectively. Meanwhile, the cost of finishing materials and labour both fell by 4.9%, while mechanical works for fire-fighting dipped 0.8%. According to announcements from the UAE’s Fuel Price Committee, as of September 2023 the price of diesel – which is commonly used in construction-related machinery – was set at Dh3.40 per litre ($0.93). This was down from June 2022, when prices peaked at Dh4.14 ($1.13), but up 15.3% from August when the price was Dh2.95 ($0.80). In November 2022, Emirates Steel Arkan (ESA), the UAE’s largest steel and building materials manufacturer, established the price of rebar at Dh2260 ($615) per tonne, marking a 13.4% decline from the Dh2610 ($710) per tonne rate observed in September 2021.
The partially government-owned ESA is a key player in the sector. The Abu Dhabi government’s industrial investment holding company, Senaat, retains a 51% stake in the company, which was formed in October 2021 when Arkan Building Materials combined with Emirates Steel Industries, a wholly owned subsidiary of Senaat, to form ESA, which is traded on the Abu Dhabi Securities Exchange (see Capital Markets chapter). In June 2023 ESA rolled out a new operating model, creating two separate business units: Emirates Steel and Building Materials. The company offers a wide range of products, including, but not limited to, rebar, wire rods, clinker and cement, concrete blocks, plastic and glass fibre pipes, and plastic.
ESA reported Dh4.43bn ($1.2bn) in profit for the first half of 2023, compared to Dh4.61bn ($1.3bn) during the same period in 2022. Revenue from the steel division totalled Dh3.95bn ($1.1bn), down 5.5% y-o-y, while revenue from the building materials division was up 9% y-o-y to Dh475.8m ($129.5m). The group also reduced its net bank debt by 41% from Dh1.1bn ($299.4m) to Dh643.9m ($175.3m). The firm attributed the performance to increased sales in North Africa, Europe and the US, and a healthy pipeline of construction projects in the UAE. Indeed, the company has expanded its international footprint to 70 countries, a 25% jump from 2021.
Commercial
In line with the country’s goals to lower its carbon emissions, ESA signed a memorandum of understanding with Japan-based trading company Itochu and JFE Steel in July 2023 to build a low-carbon ferrous raw material production facility in Abu Dhabi. The previous year ESA signed an agreement with Abu Dhabi National Energy Company to buy green hydrogen to power its steel production (see Industry & Retail chapter).
Abu National Company for Building Materials (BILDCO), meanwhile, operates subsidiaries BILDCO Reinforcing Steel Services, BILDCO Cement Products and BILDCO Aerated Concrete Production. After some challenging years for the company during the pandemic, it is beginning to narrow its losses. In 2022 BILDCO reported total sales of Dh30.7m ($8.4m) compared to Dh31.1m ($8.5m) the previous year, yet it reduced its losses from Dh41.6m ($11.3m) in 2021 to Dh22m ($6m) in 2022.
Residential
According to the Central Bank of the UAE’s 2022 annual report, various real estate subsectors performed well that year despite high interest rates. Residential sale prices in Abu Dhabi increased by 2.1% over the previous year, compared to 1.7% growth in 2021, while rents increased by 0.1% compared to a 4.2% decline. However, the implied rental yield, which is the rate of return on a rental property declined by 2%.
As of the first quarter of 2023 the average price per sq foot for Abu Dhabi apartments was Dh1030 ($280), up 1.2% y-o-y. Meanwhile, villa values increased by 1.2% compared to the first quarter of 2022, though they were down 2.2% from the last quarter of 2022. In the initial quarter of 2023, rental market prices witnessed a year-on-year decrease of 1.1% and a 5.8% drop compared to the first quarter of 2020.
In the first three months of 2023 the sales value of villas was up 7% compared to prices at the start of the pandemic, while the sales value of apartments rose by 1.7%. This reflects a rebound in the low- to mid-tier segments. Sales value in Al Reef Villas, one of the most affordable freehold areas in Abu Dhabi, increased by 16.8% during this period to reach Dh685 ($187) per sq foot. Sales value in Al Raha Gardens, another affordable area, were up 5%. Meanwhile, luxury Saadiyat Island saw prices increase by 0.4% during the same period. When analysing price trends since the peak in 2014, the value for all residential transactions has decreased by 26.2%, with apartments experiencing a 27.9% decline and villas down 19.8%.
A significant number of new units are expected to be completed between 2024 and 2026. Global real estate consultancy Knight Frank estimates that 29,000 homes are currently under construction and are expected to be completed by the end of 2025. Meanwhile, an estimated 2350 units were completed in the fourth quarter of 2022. The locations that had the largest number of villas under construction in the first quarter of 2023 were Khalifa City (4700) and Yas Island (2800). Yas Island, which experienced Dh4.2bn ($1.1bn) worth of property deals during 2022 – more than any other region – also had the highest number of apartments under construction, at 3600.
Knight Frank expects the number of units under construction in Abu Dhabi to increase in the near future, counting 5600 that had been initiated but were not yet under construction as of the first quarter of 2023. The largest of these projects is the $3.5bn Ramhan Island, east of Al Jubail Island, being developed by Abu Dhabi-based Eagle Hills. The project will feature 1800 luxury beachfront villas, 1000 branded residences, a hotel and a marina.
Office Space
In the commercial sector, forecasts suggest relatively limited development of new office space from 2023 to 2025. According to Knight Frank’s projections, the total gross leasable area for office space in Abu Dhabi is expected to reach 4.39m sq metres by the end of 2025, with 95,000 sq metres completed between 2023 and 2025. Notably, nearly half of this new office space, equivalent to 45,000 sq metres, will be constructed on Al Maryah Island.
There is a shortage of grade-A Space available as businesses continue to move their operations to Abu Dhabi City. In areas such as Abu Dhabi Global Market and landmark buildings across the city, occupancy rates are above 95%. Office rents on the Abu Dhabi mainland remained relatively stable in 2022, with the price per sq metre falling by 1.1% y-o-y to Dh1138 ($310) in the third quarter of 2022. Meanwhile, in Capital Centre, that figure rose by 4.7% to Dh1483 ($404) per sq metre over the same period.
Looking ahead, there is likely to be substantial upward pressure on office rents in the short term. Knight Frank recorded 32,000 sq metres of new office demand in the capital city in 2022, up 5% from 2021. Approximately 1.32m people are expected to be working in Abu Dhabi City by the end of 2023, higher than pre-pandemic levels.
As Covid-19 restrictions were phased out in 2022, hospitality performed remarkably well across the UAE. In Abu Dhabi, the occupancy rate of hotels climbed to 69% y-o-y in the first 11 months of the year, up from 66% during the same period the previous year. The average daily room rate rose to $129, up 29% (see Tourism & Culture chapter).
Hospitality demand was further boosted by the 2022 Formula 1 Etihad Airways Abu Dhabi Grand Prix, attended by 160,000 people, up 5% from the previous year, and by the 2022 FIFA World Cup in Qatar, a one-hour flight away. The tourism rebound has corresponded with a flurry of hospitality-related construction activity across the Gulf, especially in the UAE. As of December 2022, 27,456 rooms were under construction in the country.
Project Pipeline
Although the Abu Dhabi Economic Vision 2030 expresses the importance of creating higher-value employment opportunities outside of the construction sector, it also identifies real estate as a major potential driver of demand and calls for the construction of more transport and tourist infrastructure. As such, many major construction projects in the 2022-23 timeframe have been spurred by government action. For example, the DMT announced the opening of seven new investment zones in Abu Dhabi in 2022, bringing the total to 25 in the emirate (see Trade & Investment chapter). In the transport sector, Abu Dhabi Airports announced that Canadian aerospace giant Bombardier plans to open its first full-service facility in the country by 2025 (see Security, Aerospace & Defence chapter).
Several major residential real estate projects were launched in 2022. Phase two of Bloom Living, a project by Abu Dhabi-based developer Bloom Holding, will be a modern and integrated residential community consisting of 4500 housing units in Madinat Zayed City, with an estimated cost of Dh9bn ($2.4bn). Abu Dhabi-based Aldar Properties’ Alreeman II project, in the Al Shamkha area, continued construction throughout 2022, building 1111 villas on the 496 land plots which were released during the first phase. The project is expected to be completed in 2025 and villas will be available to domestic and foreign buyers.
Elsewhere, the Yas Hills luxury community development is under way in Al Bahia, and Aldar Properties has begun developing land plots on 1.5m sq metres for a waterfront area with residential, commercial, cultural and tourist offerings in Mina Zayed.
Also in the residential space, Aldar Properties partnered with Louvre Abu Dhabi in March 2022 to launch Louvre Abu Dhabi Residences. The 400 apartments are located in Saadiyat Grove, a Dh10bn ($2.7bn) development on Saadiyat Island. In Yas Bay, in the Yas Island district, Nine Yards – a partnership between Abu Dhabi-based entities Ethmar International Holding and Al Nahda International Holding – launched Sea La Vie, a Dh2bn ($544.4m) project. The luxury residences will include one- to four-bedroom apartments, lofts, townhouses, duplexes and penthouses. In March 2023 privately owned Jubail Island Investment Company and Abu Dhabi-based Lead Development announced Marsa Al Jubail, a $3.26bn marina community on Al Jubail Island. The design will emphasise nature, wellness and low-impact living.
In line with the growing trend of sustainable cities planned for the coming years in the GCC, Aldar Properties announced the launch of a sustainable city on Yas Island that will be equipped with solar panels and biodomes, and cater to electric vehicle owners. The first 240 townhouses and 272 condominiums were made available for purchase in January 2023, with handovers anticipated to begin in the fourth quarter of 2025. Also expected to be completed in the first quarter of 2025 is a new low-density village called Ain Al Maha, featuring 240 beachfront properties on the southern point of Al Jubail Island.
Elsewhere on the island, Abu Dhabi-based Construction General Contracting House broke ground on the 242-unit Jubail Terraces in April 2023, which will feature units with large terraces surrounded by mangroves and wildlife. The Dh10bn ($2.7bn) Al Jubail Island project is developed and managed by LEAD Development and owned by Jubail Island Investment Company. The mixed-use development is expected to be completed in March 2025.
Commercial
In commercial real estate development, Aldar Properties announced in March 2023 that it will partner with Mubadala Investment Company to build a commercial centre inside the free zone and financial centre of Al Maryah Island. Aldar Properties will have a majority stake of 60%, with Mubadala controlling 40%. The deal follows Aldar Properties’ acquisition of four commercial towers in Abu Dhabi Global Market from the wealth fund the previous year. The first tower from the joint venture is slated for completion in 2026, at which point Aldar Properties will assume management responsibilities. The company will seek a LEED Gold certification and offer 63,000 sq metres of total net leasable space.
In April 2023 Al Ghurair Foods announced that it will invest Dh1bn ($272m) to build three food-processing plants in the Khalifa Industrial Zone Abu Dhabi as part of efforts to boost food security and reduce reliance on imports. This will include the region’s first starch processing plant.
A rebound in tourism is driving new high-profile real estate projects as well. Modon Properties, an Abu Dhabi-headquartered developer of sustainable communities, opened Bab Al Nojoum Bateen Liwa in December 2022, a desert getaway in its ecotourism campsite destination, Liwa. Meanwhile, the 183,000-sq-metre SeaWorld Abu Dhabi opened on Yas Island in 2023. The amusement park, which was developed by Abu Dhabi-based Miral, marks the debut of the first SeaWorld outside of the US and features the world’s largest aquarium. Another new attraction is the Abrahamic Family House on Saadiyat Island. The project, which was inaugurated in February 2023, is an interfaith complex that encompasses three separate houses of worship – a mosque, a church and a synagogue – along with communal spaces designed for gathering and dialogue.
Outlook
In Abu Dhabi’s real estate market the primary opportunities lie in the strong demand being seen in both the residential and commercial segments, sparking increased competition and leading to a seller’s market. However, the landscape is evolving, driven by a robust local and export project pipeline; increased FDI, infrastructure and commercial development; and a resurgence in tourism. The emirate’s real estate future holds great promise, supported by numerous ongoing and planned projects, a surge in foreign investment, a flourishing construction sector, and government efforts focused on improving infrastructure and boosting tourism. This outlook is set to create a dynamic and varied market that caters to a wide range of preferences and requirements, benefitting investors, developers and residents alike.
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