Cluttons First Dubai Office Market Bulletin

Cluttons LLP, the Central London, UK-based real estate firm, has introduced its inaugural Dubai Office Market Bulletin for Spring 2016, which "seeks to unpick the complexities of Dubai's fragmented office market, while providing a detailed overview of the city's office landscape." The bulletin draws from the performance of 22 submarkets across the city in the first quarter of the year, which revealed that 13 markets showed no change in starting rents in 2015, while seven markets had notable increases, and two markets with lower limit rents decrease over the 12 months of 2015.

"Despite sustained demand, occupiers remain cost conscious and budget driven in the face of a softening global economic backdrop, with the key word for many being 'prudence'," said Faisal Durrani, Cluttons' head of research. "Landlords, by contrast appear to be slow to react to the cooling market, with many reluctant to move on asking prices and others demonstrating a lack of flexibility for lease terms at renewal. The emerging gulf between market reality and landlords' expectations is a concern, particularly for a market that is now starting to show signs of maturity."

According to the bulletin, with the establishment of two new free-zones in the form of Dubai Design District (D3) and Dubai World Trade District in 2015, Central Dubai has become the focus of many occupiers and developers, particularly as it has long suffered from a demand-supply imbalance in the face of rising requirement levels. D3's lower and upper limit free-zone rents have registered a 67% and 28% rise respectively since its launch, pushing them to between AED 150 psf and AED 165 psf.

To read the full report, click here. For more news and information visit Blumberg Partners.

Blumberg in the News

Philip Blumberg, Founding Chairman and CEO of Blumberg Capital Partners, was featured as a Cityscape speaker in a 60 second interview with Cityscape Global this month. An excerpt follows:

Q. Whereare the best investment opportunities in global real estate today? USA, Europe, Asia or Middle East?

Opportunities lie in developments and acquisitions which respond to fundamentals and real end user demand, rather than speculation.

I would look to:
Affordable housing, triple net corporate facility investments, opportunistic acquisitions of heavily discounted but well conceived, located and executed commercial and office developments in developing and emerging markets.

Down the road investment in European economies.

Q. How significant is speaking at the Global Real Estate Summit to you? What are your reasons for taking part?

Having the opportunity to speak and participate in this conference over the past 10 years has been a privilege and very enjoyable experience.

Watching this event grow into one of the preeminent real estate conferences in the world is a remarkable achievement, and a good use of the most precious resource: time.

To read the full article, click here. For more news and information visit Blumberg Capital Partners.

Building and Development in Dubai

The Jumeirah Emirates Towers (along with Burj Khalifa and Burj al Arab - the famous soaring Jumeirah resort hotel in the Gulf) are the symbols of Dubai and along with Emirates Palace, they are the symbols of the UAE and to some extent the emerging states of what is known as the GCC (Gulf Cooperating Council). Almost every GCC country (except Oman) is trying in one way or another to replicate the power these buildings suggest in moving towards a modern future and in overcoming the desert. Oman an ancient country that once stretched from Pakistan to Zanzibar, prizes its desert architecture and low scale, almost whitewashed or sand washed, buildings.

Across from the Jumeirah Emirates Towers on Sheikh Zayed Road, there is a building that is designed to look like a circuit board. The reason for this and much odder designs and shapes for office buildings is that throughout the region and India as well, office buildings are more often developed for speculative investors in a flipping scheme than tenants.

This investment structure means each developer is competing with others to attract buyers for his floors. That's why so often Dubai buildings end up with wholly impractical designs, such as a turning office building, to set themselves apart from others, but without thought to practical value to end users. Further, the floor by floor sales of these buildings means no unified building management or leasing.

The capital used to build most speculative buildings, both office and residential, is 100% debt in the form of deposits. The risk of this to the buyer is that the developer has little at risk and the buyer has all the risk. Further, there has been no clear law defining their rights or the developer's obligations. This mess of a system was very, very fragile and waiting for any market factor to topple it.

That's what happened in 2008-2009 as interest rates increased slightly and loans for the buyers continuing deposit obligations, or the next buyer to flip sell to became scarce. As financing dried slightly the whole market withered and collapsed.

As the real estate economy collapsed, it meant the construction industry, and investment capital flows shut down precipitating a full financial disaster for heavily over extended Dubai, which relied heavily on these sectors (along with ports and tourism trade) for its economic life.