Apartment rents in Abu Dhabi saw marginal falls in the last three months of 2009, as increased residential supply came on line, according to a new report published on Monday.
Property services company Asteco said that although rents in Dubai have on average remained stable over the last quarter, apartments were still in the region of 20 percent cheaper than in Abu Dhabi.
"Thus the number of people working in Abu Dhabi but continuing to live or moving out to Dubai is remains noteworthy," said Elaine Jones, CEO of Asteco.
"This trend is not expected to change in the short term without the perceived value for money versus location issue being addressed."
She added: "Given the slight increase in vacancy levels and the additional supply of residential property in Abu Dhabi, the rental market has shown signs of softening, striking more of a balance between the negotiating power of tenants and landlords.
"The growing availability of units and a revival in market activity after a traditionally slow summer period have resulted in a minor downward fluctuation in the cost of renting in Abu Dhabi," she added.
In terms of new quality supply in Abu Dhabi, there are around 2,000 new apartments due to be ready for lease on the main Abu Dhabi Island during the first half of 2010, with a similar number during the second half, the report said.
In addition, Marina Square, Sun & Sky Towers and Al Bandar will provide around 6,500 apartments by the end of the second quarter 2010 with a further 1,286 units due to come online at Al Muneera by the end of 2010.
On villa rents, Asteco reported a mixed picture with villa rents on the main Abu Dhabi Island declining between 10 to 20 percent in the last quarter. The largest falls were seen among the larger five-plus bedroom villas at the luxury end of the market.
However, the off-island villa developments of Al Raha Gardens and Sas Al Nakhl witnessed continued healthy demand following sharp reductions in rents earlier in the year with rents largely stable over the last three months.
Retail rents for ground floor shop units and showrooms in Abu Dhabi have fallen by between 5-10 percent over the last three months, continuing the downward trend from earlier in the year, Asteco reported.
"Despite the drop, there is, in many cases, still a mismatch between landlords' rental expectations and those of prospective tenants, and thus an increase in available vacant space is evident, providing retailers with options and thus negotiating power."
The report also showed that Al Ain's residential market continued to see slight decreases in rental rates in the fourth quarter last year, predominately for new villa buildings.