Abu Dhabi prime office rents to fall further

The falling oil price has reduced demand for office space in Abu Dhabi. (Shutterstock)
Updated 17 April 2018

Abu Dhabi prime office rents to fall further

  • Landlords have been cutting rents and offering incentives to tenants, pushing prime office space prices down by 1.6 percent in the first quarter of this year compared to Q1 2017.
  • Demand for office space has declined in Abu Dhabi in recent years due to falling oil prices and the subsequent economic slowdown.

LONDON: The cost of renting prime office space in Abu Dhabi has fallen in the last year and is expected to fall further, according to a report by real estate broker Knight Frank.
Landlords have been cutting rents and offering incentives to tenants, pushing prime office space prices down by 1.6 percent in the first quarter of this year compared to Q1 2017, the research found.


Prime rents in Q1 stood at around an average of 1,800 dirhams ($490) per square meter a year. Grade A and citywide rents declined more sharply, falling by 8.2 percent and 12.9 percent respectively to reach an average of 1,422 dirhams p/sqm and 1,083 dirhams per/sqm.
Demand for office space has declined in Abu Dhabi in recent years due to falling oil prices and the subsequent economic slowdown. This year landlords have conceded they needed to cut rates to spur demand, prompting “tentative signs of renewed activity within Abu Dhabi’s occupier market,” the report said.
The short to medium-term outlook for Abu Dhabi’s office market remains “negative,” with further falls in rental values expected over the coming year, according to Knight Frank.
The real-estate broker said that while more than 195,000 square meters of stock is scheduled to be delivered this year, it is likely that only 70,000 square meters will hit the market, with the remainder pushed into the second half of 2019.
The research pointed to increased pressure on vacancy rates in the citywide market due to current occupiers moving into newer higher-grade stock that is increasingly becoming more affordable due to rent cuts.

FASTFACTS

Grade A and citywide rents declined more sharply, falling by 8.2 percent and 12.9 percent respectively to reach an average of 1,422 dirhams p/sqm and 1,083 dirhams per/sqm.


US funds rare earths plant for weapons development

Updated 11 December 2019

US funds rare earths plant for weapons development

  • Washington threatens to halt export of minerals as bargaining chip in trade war

MELBOURNE, Australia:  The US Army plans to fund construction of rare earths processing facilities, part of an urgent push by Washington to secure domestic supply of the minerals used to make military weapons and electronics, according to a government document seen by Reuters.

The move would mark the first financial investment by the US military into commercial-scale rare earths production since World War Two’s Manhattan Project built the first atomic bomb.

It comes after President Donald Trump earlier this year ordered the military to update its supply chain for the niche materials, warning that reliance on other nations for the strategic minerals could hamper US defenses.

China, which refines most of the world’s rare earths, has threatened to stop exporting the specialized minerals to the US, using its monopoly as a cudgel in the trade spat between the world’s two largest economies.

“The US rare earths industry needs big help to compete against the Chinese,” said Jim McKenzie, chief executive officer of UCore Rare Metals Inc, which is developing a rare earths project in Alaska. “It’s not just about the money, but also the optics of broad support from Washington.”

The Army division overseeing munitions last month asked miners for proposals on the cost of a pilot plant to produce so-called heavy rare earths, a less-common type of the specialized minerals that are highly sought after for use in weaponry, according to the document.

Responses are due by Dec. 16. UCore, Texas Mineral Resources Corp. and a joint venture between Lynas Corp. and privately-held Blue Line Corp. are among the expected respondents, according to company officials and sources familiar with the matter.

The Army said it will fund up to two-thirds of a refiner’s cost and that it would fund at least one project and potentially more. Applicants must provide a detailed business plan and specify where they will source their ore.

This latest move by the Army comes after a military study earlier this year on the state of the US rare earths supply chain. The rare earths tension goes back to at least 2010, when China limited exports to Japan after a diplomatic dispute, sending prices for the niche metals spiking and fueling concerns across the US military that China could do the same to the US.

The US Army Combat Capabilities Development Command Chemical Biological Center and the US Army headquarters did not respond to requests for comment.

The request does not give a specific financial amount the Army could fund, though it is derived in part from the Defense Production Act (DPA), a 1950s-era US law that gives the Pentagon wide financial latitude to procure equipment necessary for the national defense.

A rare earth processing pilot plant could cost between $5 million and $20 million, depending on location, size and other factors, with a full-scale plant potentially costing more than $100 million to build, industry executives said.

“It’s great to see interest in financially supporting the industry from the Department of Defense,” said Jon Blumenthal, CEO of Blue Line Corp, which earlier this year signed a memorandum of understanding to build a rare earth processing facility in Texas with Australia-based Lynas Corp.

Blumenthal declined to comment when asked if Blue Line will respond to the Army’s request. Lynas declined to comment.

It is not clear how the Army will rank the responses given that much of the rare earths industry expertise is now located in China, though the modern rare earths industry itself had its genesis in the US decades ago.

“Instead of providing funds for yet another study, this allocates money toward establishing a US-based rare earth supply chain,” said Anthony Marchese, CEO of Texas Mineral Resources, which is developing the Round Top mine in Texas with USA Rare Earth.

After processing, however, rare earths need to be turned into rare earth magnets, found in precision-guided missiles, smart bombs and military jets and China controls the rare earths magnet industry, too.

The Pentagon has not yet launched an effort to finance domestic magnet manufacturing.

“Closing the magnet gap would do more to address the nation’s defense needs, and as well the needs of electric vehicle makers and others,” said Ryan Castilloux, managing director with Adamas Intelligence, a research firm that closely tracks the rare earths industry.