Dubai Int’l Financial Centre to cut rents to spur demand
DUBAI: Dubai International Financial Center, a tax-free business park, will cut rents and operational costs by as much as 50 percent to encourage companies to expand following the financial crisis.
"We have benchmarked the pricing against other international business centers," Abdulla Mohammed Al Awar, DIFC chief executive officer, told reporters on a conference call in Dubai today. "We want to give clients in the DIFC the benefit of lower prices so they can grow their businesses."
DIFC said it will amend rental charges for companies operating in the center with effect from January.
Dubai set up DIFC in 2004 to attract international banks, asset managers and insurers to help diversify its economy. International banks such as Goldman Sachs Group Inc. and Citigroup Inc. which have their regional offices in the DIFC, boosted their presence in the Middle East over the past five years as rising oil wealth increased demand for financial advice. Bahrain and Doha in Qatar have also set up financial districts to attract foreign banks.
Commercial prices and rents in Dubai slumped 60 percent on average since the peak in mid-2008 as companies abandoned plans to expand and additional supply hit the market.
The vacancy rate of 40 percent will be exacerbated by at least 20 million square feet (1.85 million square meters) of new space, equivalent to about 40 percent of Dubai's existing office supply, due to be added in the next four years, CB Richard Ellis Group Inc. said on Oct. 14.
DIFC, which houses many financial services companies, commands the highest commercial rates in Dubai. Some of these rents reached a peak of $200 (734 dirhams) per square foot, Al Awar said.
That is changing as the highest rents in DIFC will be in the Gate building at 280 dirhams per square foot for an area of up to 2,499 square feet. The lowest rent for the same amount of space will be charged in the Gate Village at 235 dirhams a square foot, the DIFC statement said.
"We want to bring rents in line with the current market rate and give visibility to our clients," the CEO said. "Some businesses will receive more than a 50 percent discount on rents," he added.
Developers are expected to complete about 2 million square feet of space in the DIFC area over the next 18 months to two years, the statement said.
Currently, DIFC-owned leasable buildings are at full occupancy, Al Awar said. One of three new buildings owned by third party developers is 70 percent occupied, he said. Buildings owned by third party developers currently make up about 35 percent of DIFC's office space available for rent.
In a separate news item, Brookfield Office Properties paid $321.5 million for Heritage Plaza, a 53-story skyscraper in Houston's downtown Skyline District, increasing its presence in Texas's biggest city.
The company bought the 1.2 million-square-foot (111,000-square-meter) tower from Goddard Investment Group LLC. Brookfield, downtown Houston's largest office owner, now has 10 properties totaling more than 10 million square feet in the city, the New York-based landlord said in a statement yesterday.
The sale demonstrates the attractiveness of the secondtier U.S. office markets as investors drive up prices in cities such as New York and Washington, said Christopher Macke, senior real estate strategist at CoStar Group Inc., a Washington-based real estate data service. Prices in New York, Washington and San Francisco were up 37 percent through August from their 2009 low, the MIT Center for Real Estate said in October.
"Houston is a logical secondary market to look at because of the high percentage of industry related to energy," Macke said in a telephone interview. -Bloomberg