The UAE property market will likely take some time to recuperate from the debilitating effects of a widespread economic slowdown, which has been worsened by dwindling rents and an oversupply of spaces, says the chief executive of a Dubai-based development company.
Shahab Lutfi, CEO of HH, a company he has established in 2007 with fellow entrepreneur Mohamed Al Hussaini, said clouds will continue to hang over the Emirates’ real estate sector as developers face a challenging market.
“I don’t think the market will experience an upswing in the next 12 to 24 months. Some [real estate companies] will do alright while [others] will do poorly. It depends on how [they] manage the cash flows of their projects,” says Lutfi.
According to a report published in January by Jones Lang LaSalle (JLL), total office spaces in Dubai at the end of 2009 were approximately 43.6 million square feet (sqft). An additional 40m sqft of office stocks – down from an earlier forecast of 60m sqft – had been expected to enter the commercial property market between 2009 and 2011. The downward revision has been attributed to project delays and cancellations.
These new dynamics has transformed the local property scene into a tenants’ market with office rents plunging by an average of 44 per cent between the fourth quarter of 2008 and the same period of 2009. Likewise, office capital values have gone south by about 50 per cent to just around Dh1,320 per square foot (psf), JLL also mentioned in its report
City-wide vacancy rates are currently around 33 per cent and JLL is expecting this figure to increase further this year as new office spaces become available.
Dubai tenants becoming ‘picky’
An abundance of commercial spaces and more affordable rents have made tenants “very picky”, according to Lutfi. However he believes not all buildings in Dubai are created equal as there are factors that could help sell a property better than others.
“You can go to Sheikh Zayed Road and find a building renting an office space for Dh90 psf, for instance, and another building in the same area for Dh160 psf. Why? Because one building is better maintained and has better specifications than the other,” he explained.
HH recently handed over its flagship project, a Dh300-million
22-storey freehold commercial property called O14 (“O” fourteen) along Business Bay.
The oddly-designed tower, which derived its name from its plot number, has a perforated concrete façade that acts as the tower’s core – making it one of the most distinct structures in the Dubai skyline.
Lutfi added that the concept behind the O14 tower design by New York-based architects Reisur and Umemoto (RUR) Architecture PC was adopted from “mashrabiya”, an Islamic ornamental motif used in windows of old houses or buildings as a sort of shield against the sun.
“We never directed the architects on how to design the building, but we did tell them that we wanted a building that is different from the glass-façade towers normally seen in Dubai,” he said.
Lutfi added that the practical aspect of O14’s design (which has a “you-either-love-it-or-hate-it” appeal) proves to be economically beneficial to tenants.
“The perforated façade acts like a skin or veil over the building. This also helped in creating column-free office spaces, which makes it an efficient workspace because the tenants can subdivide as they like. It offers a modern office concept,” he said.
Green is the future of construction
Lutfi believes that the UAE construction industry should focus more on creating green buildings not only as part of their corporate social responsibility (CSR) agenda, but also because it is a more economical way of building structures.
“Right now, green technology is the most important factor when taking into account a building’s lifespan. Electricity has become very expensive. So if a building can minimise its power consumption, it can offer long-term benefits to tenants and can prove to be more efficient as a commercial space,” he said.
In 2008, Dubai became the first city in the Middle East to implement internationally-recognised green building specifications and standards.
The neighbouring emirate of Abu Dhabi has also embraced this policy as they introduce their own “green” codes, which will take effect in March this year, it was revealed earlier in
Alrroya.com.
Consider also reading:
Abu Dhabi property prices to slide till 2012
UAE property prices seen flat in 2010: LaSalle
Defining the ‘new normal’ for UAE real estate
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