Leasing Commercial Premises Is A Must For All Abu Dhabi Companies

24th August 2015

This article featured on Crompton Partners Estate Agents website, 24th August 2015.

Guest post from Jenny Hunt, Founding Partner at Gateway Group of Companies, on leasing commercial premises in Abu Dhabi.

I help foreign companies entering the Abu Dhabi market to set up safely and securely and to structure their business in such a way that it is right for their needs and goals. I help companies through the incorporation process to ultimately obtain their commercial license so that they can legally do business here. During the incorporation process, it will be necessary for the foreign company to arrange a commercial lease.

What type of premises are required?

It is mandatory for all businesses to have premises which are suitable for the activities that they are engaged in, as per their commercial license.

For example, if you are setting up a small consultancy business, it would be necessary to lease a small office space. Alternatively, if you are setting up a manufacturing facility, it would be necessary to lease either an industrial piece of land to build a special purpose unit or to lease a warehouse.

Are villas considered commercial premises?

In the past villas could be classified as commercial and used for many activities. However, in line with the government’s Economic Vision 2030, businesses now need to be located in purpose build premises and villas are generally classified for residential use. Nowadays there are just a handful of activities that are allowed to be conducted from villas and these include children's nurseries, beauty salons and clinics.

Are there specific requirements the premises need to meet?

The activity on the commercial license will determine if there are any special approvals required. If so, such special approval bodies may have specific criteria for your commercial premises, so its always worth checking. For example, if you are setting up a training centre, the approving body, ACTVET, requires the commercial premise to meet the following criteria:

Located in a commercial building or the mezzanine/commercial floor
Minimum 100sqm floor plan
Minimum 1x training room of at least 30sqm
Sufficient management/staff rooms
Reception/waiting area
Toilets within the training centre or at least on the same floor

There are further specific requirements also relating to the lighting, air conditioning, wiring, furniture etc…

Other activities, such a retail or general trading are required to be on the ground floor (unless in a special purpose building, such as a shopping mall). Office-based activities are required to be on the first floor or above, but in a commercial unit. It is not acceptable for work to be conducted from a residential property.

Are there specific size requirements?

This depends upon the activity.

For office space, there are no specific guidelines relating to the minimum size, but as a guideline, business centres’ smallest offices are usually 14sqm upwards. The size of the office space should relate to the number of visas anticipated. In a conversation with the inspection department about minimum sizes for office spaces, I was once informed, that if the company is intending to employ 10 staff, then the office should be large enough to house 10 desks/chairs for the employees to work comfortably.

For ‘General Trading’ the minimum size space is 70sqm; whilst for a ‘Supermarket’ the minimum size is 200sqm.

It’s always worth checking the space and minimum size requirements for each activity.

Is there any special dispensation for startups and entrepreneurs?

Unfortunately not, the same rules apply whether you are a budding entrepreneur or a multinational organisation.

Do the premises get inspected?

If alterations to the layout are required, such as putting up partitioning or moving AC vents, it will be necessary to get revised plans approved by the Abu Dhabi Municipality and the completed work will require inspection. This may also involve Civil Defence.

As part of the company incorporation process, all premises will be inspected by the authority responsible for issuing the license, e.g. for onshore licenses, the Inspection Team from the Department of Economic Development (DED) will carry out the inspection. It should be noted that prior to the inspection, the premises should be fitted out accordingly and relevant signage should be displayed and approved too.

Depending upon the activity of the business you may get ongoing inspections once the business is up and running. For example, a restaurant will get regular inspections from the Abu Dhabi Food Control Authority (ADFCA) to check the premises are clean and hygienic, and that food is stored correctly, amongst other points.

What is Tawtheeq?

Abu Dhabi Municipality is responsible for registering all leasable properties and their tenancy contracts. This is called Tawtheeq. All businesses are required to have a Tawtheeq lease – this should be provided by the landlord, business centre or property management company. In some areas, such as the Musaffah industrial zone, a standard lease is acceptable and a Tawtheeq lease is not required. Please check what is required before signing the lease and handing over the rental fee.

How is the Rent paid?

In Abu Dhabi it’s common for rental fees to be paid a year up front. Some landlords will allow payment over two cheques, but the more frequent payments are less common. A security deposit of 5% - 10% will also need to be paid, along with the real estate agent’s commission of 5%.

In summary, a lease is a big part of the investment in a company formation and its essential to get it right first time to avoid unnecessary costs. It’s worth engaging a reputable real estate company to assist you in sourcing the suitable premises. They will have premises in their listings, often hear about places before they are made available to the market and will be able to call upon their network of landlords to find solutions for you. They will also be able to guide you in relation to location and market rates.