OmarKassim.com

Abu Dhabi has been quiet in comparison to the other Emirates within the UAE in terms of putting themselves on the map. While the other Emirates (especially Dubai and Ras Al Khaimah) have been quick to announce mega projects, Abu Dhabi has been content in taking it easy, and play the waiting game.

Abu Dhabi’s patience or alternately lack of development has had two effects, the first has been a lack of supply which has driven rentals in both the residential and commercial sector to prices above Dubai. Rentals for prime office space crossed 300 AED per sq ft much before Sheikh Zayed Road hit its current levels. The second more positive effect has been that Abu Dhabi has watched what Dubai has done and has decided to learn from its neighbour’s mistakes - potentially, of course.

The result has been three natural islands - Reem Island, Yas Island and Saadiyat Island all being turned into individual mega projects. The key difference that everyone is quick to point out is that the aim here is to provide better quality of life (than Dubai), which means better planning, more greenery and heaps of parking space.Reem Island is being codeveloped by three master developers - Sorouh, Tamouh and Reem Developers. I am sure there is a lot of material out there with all the details, so I won’t get into individual projects within this email. Reem Island is very closely located to the existing island that the city of Abu Dhabi sits on. Construction is underway for multiple access points onto the island. When Abu Dhabi’s train or metro system is finished, it is expected that Reem Island will be a 30 minute commute from Dubai.

The other two island are located alongside Reem Island and are to be individual developments in their own right. Yas Island’s centerpiece will its Formula One track, scheduled to hold its first race at the end of the 2009 season, while Saadiyat Island (motto: Island of Happiness) features a cultural district with attractions such as the Louvre, the Guggenheim as well as a variety of other attractions such as the Performing Arts Theater designed by Zaha Hadid. An in-depth exhibition with all the details is currently on at the Emirates Palace Hotel in Abu Dhabi.Abu Dhabi largely remains a 99 year leasehold area. However, with the Al Raha Beach development recently being converted to freehold, it is expected that the majority of the new projects will be converted to freehold status in the upcoming six to twelve months.

Prices in Abu Dhabi remain on par with Dubai. However, this is expected due to the high price of construction. Technically, it is more expensive to construct in Abu Dhabi than in Dubai due to a lack of availability of inputs locally. Material, equipment and labour will probably be brought in from Dubai - adding abut 50 AED per sq ft to construction costs.Visas still remain an issue, developers are not guaranteeing the availability of a visa to an end user. However, it is likely that the master developers will create a workaround much like Emaar has done, before a federal solution comes into place.

I personally feel that the Abu Dhabi market is almost six years behind Dubai in terms of development. I would say that the smart money should move there fairly soon, and that much like Dubai, the pieces will eventually fall into place. The biggest advantage that Abu Dhabi has over Dubai is sheer wealth.

Abu Dhabi’s economy is described as consisting of two halves - the Oil and Gas sector, and ADIA. Abu Dhabi Investments Authority is estimated to control anywhere between USD 0.5 trillion to USD 3 trillion in assets. ADIA is veiled in secrecy and has never published any numbers in it’s 30 year existence. However, it’s pulling power is enormous. A 2006 article in Euromoney cites an HSBC banker who says that it is one of the few organizations that Stephen Green, or his predecessor as Chairman of HSBC, John Bond, will drop everything to go and see.

ADIA gives me confidence that any government backed initiative in Abu Dhabi will be seen through to the end, simple because they have the money to do so.The other big worry for investors is that they wonder where the people will come from. It’s the same question that many asked of Dubai - and Dubai is yet to answer, but continues to build, while valuations continue to rise. Abu Dhabi will attract individuals who are looking for a quieter lifestyle to that which is offered by Dubai. It will continue to attract individuals who are working within the Oil and Gas sector as well as those who will work in Dubai and play in Abu Dhabi. Aside from individuals moving to live in Abu Dhabi, a large floating population will come into play due to the array of attractions coming to Abu Dhabi.

The last piece of the puzzle is brand Abu Dhabi. Abu Dhabi has recognised this as a problem and is taking a number of measures to address this. The first and foremost is Etihad. As Emirates has done for Dubai, Etihad will expose the world to Abu Dhabi, and with oil wealth backing it the hilt, no one can discount their ambitions. The second is the Abu Dhabi Tourism Authority who are promoting Abu Dhabi through their offices in Europe. Again, the key factor here is wealth. I am sure we will see Abu DhabiEvery investment requires an entry and exit strategy. I strongly feel that now is the time to enter Abu Dhabi and to gradually start divesting from non rental income assets in Dubai.