With every passing week between now and the year end, the buzz of expectation within the local commercial space will ratchet up by a further few levels.
Put it down to the looming 'Burj Effect', literally and otherwise, as the marketplace exudes a cautious sense of optimism that office rentals would show some signs of a turnaround once the tallest building in the world starts exerting a benign influence. But is this sentiment misplaced?
"As an estimate, rents for commercial space in Burj Dubai could be between Dh350 and Dh600 a square foot," projects Hesham Al Far, CEO of Coldwell Banker's local operations.
The market at large would sure hope the rates to be closer to the higher level, more so after the buffeting office lease rates have been subjected to since the beginning of the year. Even now, companies are showing a marked unwillingness to commit even to the lower rates that are being quoted around, no doubt keeping an eye on the new and substantial office capacities that are to come on stream in the short-term.
But the Burj Dubai, expected to start the handover process before the end of the year, could end up imposing its own dynamic on the marketplace. Granted that the offices in the 160-plus storey structure are certainly not for every other corporate tenant, even then there is no denying the impact it will have on rental trends in its immediate neighbourhood and beyond.
The offices either side of Shaikh Zayed Road currently fetching rents of Dh150 a square foot on average could benefit, in much the same way as the opening of the office block forming part of Emirates Towers did all those years ago. But this time out, will the impact of having a new signature tower, and the tallest at that, be more limited?
Omar Ghani, CEO of Fine & Country, believes this to be the case. "With the increasing level of office space being released over the coming months, we do not feel that the Burj Dubai launch is likely to positively affect rentals in the area too much," he observes.
There are others who think along the same lines. "These days it is proving difficult to get corporate tenants interested in Dh200 to Dh250 a square foot, forget anything above these levels," says the head of commercial leasing at a local real estate services firm.
"While the leasing process for the Burj Dubai offices is still some weeks off, we think the rate would be around Dh500 a square foot. This is gettable, but the Burj Effect, if any, will not extend beyond Business Bay and Downtown Burj Dubai. I certainly do not see the towers on Shaikh Zayed standing to gain anything most of them are older structures and parking remains an issue that is not going to go away soon." The smart investor also seems to be holding his bets. There has been no indication of heightened buying interest for office units during recent weeks, despite prices having softened considerably in the post-boom period.
"Current prices in Burj Dubai for commercial space vary from Dh4,000 to Dh7,000 a square foot. This is slightly higher than the price in 2005 but has dropped from the boom period (when rates hovered well over Dh7,000 and in some instances have had asking rates of even Dh11,000)," says Al Far.
"People are showing very little interest, it should pick up once the tower is ready."
Guess even the Burj Effect has been somewhat dimmed by what the market has gone through since the start of the year.
Residential transactions at Burj Dubai
After an initial run of panic selling when the correction took hold, residential transactions at the Burj Dubai has settled down. Now, market watchers are wondering whether there will be a significant rise in interest as D-Day approaches for the actual handover process to start on the apartments. As such, a good majority of the present owners are inclined not to put their units on the market. Obviously, they have the means to hold on to these prized assets.
Another factor could be that these owners don't see any gains accruing from selling in a down market. "Most of the investors bought during the launch period and have already paid about 60-70 per cent of the payment," says Hesham Al Far, CEO of Coldwell Banker's local operations. "Those who had purchased with the idea of re-selling already sold their properties around two years ago." In the secondary market, the Burj Dubai residences hover between Dh3,000 to Dh5,000 a square foot, which is quite some distance removed from the peak values of Dh7,000 plus prior to the correction. But whatever buying is taking place now is limited to single units. residential transactions at burj dubai Global Arab Network
By Deepthi Nair, Sub Editor, Gulfnews