Due to the pandemic-induced economic slowdown, the commercial property market in Abu Dhabi remains favorable as average rents fell in Q1 2021. According to the latest report from the leading consultancy firm, Knight Frank, the trends of consolidation of space and flight to quality are likely to continue. Occupiers are looking to take advantage of weaker market conditions to upgrade their occupational space, whilst also being mindful of increasing their commercial space.
Investing in commercial property can be quite confusing, especially for first-timers. Therefore, we have decided to guide you through the different types and features of commercial real estate in Abu Dhabi, as well as the specific laws regarding properties and the current pricing offers.
Implications of VAT for Commercial Property in the UAE
Firstly, it is essential to know about the VAT registration, which is 5% of the property value, for buying or renting commercial property, which came into effect from January 2018. There is no distinction between tenants and owners when it comes to VAT, the same rule applies to both. The seller must issue a tax invoice on top of the listed purchase price when a business or individual is investing in UAE commercial properties. The VAT invoice is issued on top of the bill for the annual lease payment. However, if you sell the property with a tenant already occupying it and there are no plans for the tenant to leave, as long as both the seller and buyer(s) are registered for VAT, then you are exempted from this regulation.
Furthermore, a seller must register for VAT if he is over the required tax threshold of AED 375,000 (USD 103,000) per annum. It is worth noting that not only companies are liable to register for VAT. The requirement applies to individuals who own the space as well. While both a purchaser and seller have to register with the VAT system, the buyer has to initiate the declaration and provide the required information on the Federal Tax Authority's e-services portal.
Types of Commercial Properties in Abu Dhabi
In 2019, an Abu Dhabi government initiative was launched to allow expats to own freehold property in designated zones across the city, which means that foreign owners have the full entitlement to put the land on a mortgage, sell it and inherit it. The range of commercial real estate in Abu Dhabi is expansive as the emirate offers properties for every client – from furnished offices to purpose-built factories. We will now review the most popular types of commercial real estate in Abu Dhabi.
Offices, Business Centers and Co-Working Spaces
Foreign investors can either own a property or rent an office in the UAE for the purpose of setting up a company in the country. If you are managing several businesses, renting office spaces or a business center may be more convenient and ecological. It is worth noting that a company working in Abu Dhabi or the rest of the UAE must have a physical location in the form of an office. Upon choosing a suitable property, owners will have to pay a fee to take it off the market until the lease papers are finalized.
When signing a lease for commercial property, make sure that all terms and conditions are laid down in the agreement. For instance, if the option of commercial property involves some particular changes (such as building and installation of cubicles and so on) it must be stated in the contract.
Co-working spaces are in particular demand due to flexibility and budget-friendly prices. These units are especially popular among new start-ups and entrepreneurs.
Offices for purchase are widely available in Abu Dhabi. One can buy a space of 433 sq. ft. for AED 500,000 (USD 137,000), located in the sought-after address of Reem Island, which features central AC and 24-hour maintenance services.
The starting rental price for an office of 200 sq. ft. in Mussafah Industrial Area, Abu Dhabi is AED 5,000 (USD 1,400) per annum. The unit features a meeting room and a pantry. Furthermore, a renter will benefit from 24/7 maintenance services and daily housekeeping.
Business centers are available to rent only. A fully-furnished office with a wide reception area at Al Najda Street can be rented for AED 6,000 (USD 1,700) per annum. With an area of 214 sq. ft. the office includes services such as office boy assistance, reception assistance and support during municipality inspection. Water and electricity bills are included.
One can also rent a coworking office space of 99 sq. ft. for AED 13,500 (USD 3,700) annually in the Hussain Al Muallah Tower, which features a fully-equipped meeting room, furnished pantry, spacious reception area and CCTV. One can also benefit from services including maintenance and cleaning.
Shops, Retail Spaces, Warehouses and Showrooms
Abu Dhabi also has an extensive array of shops and warehouses to choose from. Both small shop units and spacious retail spaces are on offer for sale and to rent. These units are located in the sought-after areas of Al Dhafrah, Muroor Area, Al Maffraq and Musaffah, among many others. Warehouses are perfect not only for commercial storage but also for light manufacturing processes.
A retail space of 2,555 sq. ft. at Electra Street can be purchased for AED 350,000 (USD 96,000). Currently operating as a supermarket, it is fully functional and staff is available, if required.
Another attractive offer is a 1,000 sq. ft. shop located in Al Nahda which is available for a total price of AED 110,000 (USD 30,000).
Furthermore, a generously sized warehouse of 22,500 sq. ft. in the Mussafah Industrial Area can be acquired for AED 2,000,000 (USD 545,000). The unit is ready to move in and it features 7 bathrooms.
A 40,000 sq. ft. show room is available for the starting price of AED 2,000,000 (USD 545,000). The unit is conveniently situated in Mussafah, and features a large parking space.
Currently, there is a great offer on a spacious fitted retail space on Al Reem Island for AED 35,000 (USD 9,600) a year. Amenities include CCTV monitoring of public spaces and 24/7 security guards. Moreover, the tower, where the retail space of 310 sq. ft. is located, offers a gym, health club, pool and car parking.
If you are searching for a store unit to rent, then Mussafah Industrial Area has some attractive units available. For instance, a store unit of 587 sq. ft. is available for AED 25,000 (USD 7,000) per year and features a bathroom and an internal office.
Also located in the Mussafah Industrial Area, is a warehouse of 450 sq. ft. which is on offer for AED 35,000 (USD 9,600) per annum. Cleaning and maintenance services are available as well as round-the-clock security.
A show room with a generous size of 3,930 sq. ft. in the same area is available for AED 160,000 (USD 44,000) per annum. The multi-purpose space which can be used not only as a showroom but also as a restaurant or supermarket, as well as many other retail categories. There is a large parking area for customers and clients which is included in the price.
Labor Camps and Staff Accommodation
We have mentioned the VAT registration of commercial properties, however, there are some exceptions to labour staff accommodation. If it is purely a residential building, then this will be exempt from VAT as per Article 46 (2) of VAT law. At the same time, if the residential accommodation is providing additional services, it is subject to VAT. These services may include phone and internet access, maintenance; other than what is required for the general upkeep, and laundry services, among others.
This type of unit is only available to rent at the moment. A labour camp of 225 sq. ft. in Al Mussafah Industrial Area can be rented for AED 15,500 (USD 4,300) per annum. As in most cases, the rent price includes water, electricity, AC consumption and maintenance. The unit has a capacity of 8-12 people in each room.
Staff accommodation of 250 sq. ft. in the same area is slightly cheaper. At the cost of AED 15,000 (USD 4,100) a year, it features a spacious kitchen/cooking area, WC and shower rooms and intruder alarm systems.
Commercial Land, Buildings and Villas
It is worth noting that planning permission must be obtained for all strategic, large-scale developments in Abu Dhabi to ensure that they are consistent with the Vision 2030 master plan. The planning permission permit is required from two separate entities: the UPC as the overall strategic planning and zoning authority for Abu Dhabi and the Abu Dhabi Municipality as the local planning authority which issues the building permit and any regulations. Additional approvals are to be required from the Abu Dhabi Electricity and Water Authority (DEWA), Abu Dhabi Civil Defense, the relevant telecommunications provider, the master developer (if the land is located within a master community) and environmental approval from the environmental department of Abu Dhabi Municipality. The review process aims to ensure that these developments are sustainable in terms of their environmental, economic, social and cultural impact, also known as Estidama requirements.
Once the approvals are obtained, a building permit must be provided by Abu Dhabi Municipality. A building permit is also required prior to carrying out any extensive works to existing buildings. When the construction or works are completed, a completion certificate is to be obtained from Abu Dhabi Municipality in order for the occupation of a building to be permitted.
The starting price for a commercial building of 5,000 sq. ft. located between Mussafah and Khalifa City A, is AED 8,500,000 (USD 2,315,000). The building offers 9 apartments with 2 bedrooms, as well as units with 3 bedrooms on the roof.
As for land plots, a unit of 4,190 sq. ft. can be acquired for AED 800,000 (USD 218,000) which is located in AlReeman2, close to many amenities including shops, mosques and schools.
Mussafah Industrial Area offers a range of land plots to rent. For instance, a plot of 3,280 sq. ft is available for AED 150,000 (USD 41,000) per annum.
One can rent a full building in Baniyas West for AED 1,500,000 (USD 410,000). The size of the property is 21,528 sq. ft. and it consists of 4 floors.
Full and Half Floors
The generous size and practicality of half and full floors allows its owner to use the unit for multiple purposes. For instance, one can build a spacious office with amenities for their own use. It is also possible to rent out a commercial half/full floor to private companies like clinics, healthcare associations or other establishments. These units are in high demand among investors as they are aimed at bringing in a stable long-term profit.
There is an attractive offer in Hamdan Street – an operating gym on a half floor of 2,000 sq. ft. with a price of AED 225,000 (USD 62,000).
Furthermore, one can acquire a full floor of 23,015 sq. ft. with office spaces for AED 32,000,000 (USD 8,712,000). Located in Sky Tower, the floor includes a total of 21 parking spaces, a washroom, pantry and an in-house maintenance team.
A fully-furnished commercial floor is available to rent for AED 850,000 per annum in Al Remah Tower. The full floor features a reception area, conference room, store room, server room and pantry alongside other facilities. The size of the unit is 12,917 sq. ft.
A factory building is highly flexible regarding its use as it is a multifunctional space. It can be converted into an office, storage facility, warehouse, retail shop or workshop. For heavy manufacturing, building ownership or a long-term lease with renewal options, this is the way to go.
There is a factory of 40,613 sq. ft. available for sale in Khalifa Industrial Zone for AED 7,500,000 (USD 2,042,000) and features an office block, a shaded parking area and a secure yard.
The above-mentioned factory can be rented as well. In order to get more information about the rental price and conditions, please fill out the form on the website.
When you own a farm, you have several options for making a profit. The most common is growing and selling your own crops. Otherwise, you can save the effort and lease it for a long-term profit as farms offer higher total returns than the majority of other real estate investments. This is due to the fact that they produce their own products which are in high demand. And when the property market is fluctuating, farms usually escape such volatility and continue to appreciate in value.
Located in Liwa, there is a farm of 430,556 sq. ft. which is priced at AED 800,000 (USD 218,000). The land has 800 date trees, 3 water wells and workers housing.
The same farm is on offer to rent as well. In order to get more detailed information on the conditions and annual rental price, please fill out the form on our website.
Modifications of Leased Commercial Properties
According to legislation, changes are not permitted without the consent of the lessor (unless such changes will not damage the property) within Abu Dhabi. If the lessee breaks this rule, then the lessor can demand restoration of the property and be paid compensation, if necessary. Moreover, if the renter makes improvements to the property, they must be abandoned at the end of the term, unless otherwise stated in the rental contract. As for the Abu Dhabi Global Market Zone, the parties are free to contract as they wish.
- VAT of 5% is not to be paid if a commercial property is used for merely residential purposes.
- Mussafah Industrial Area in Abu Dhabi boasts a wide array of offices, warehouses and labour camps for sale and to rent.
- Full floor units and factories are highly multifunctional because they are used for multiple commercial purposes including offices and storage facilities.
- Before constructing property on a land plot and redeveloping any already existing buildings, one has to obtain a permit from the UPC and Abu Dhabi Municipality, alongside other authorities.
- If you rent a commercial space, you are not allowed to change it in any way without the permission of the landlord.