Business | Property
Realty may take its own time to ride the Metro
In a changing business environment where corporate tenants are insistent upon longer term contracts, where do serviced offices fit into the equation?
- By Deepthi Nair, Sub Editor, Property
- Published: 16:02 November 16, 2009
- Image Credit: Silvia Baron
Let’s get this clear right away. The Metro by itself is not going to fast-track a revival for the Dubai property market. Rather, its impact will assume a more stately progression — think steam locomotive than a bullet train.
Niraj Masand, who recently took over as head of commercial leasing at Hamptons International, reckons that it will become clearer six months down the line. While access to Metro stations has translated into more enquiries for properties abutting the network, he predicts it will take around six months for the convenience factor to seep into a commercial tenant’s rationale, and for property values and rents to stabilise and thereafter firm up where possible.
“The prices are likely to go up when people begin to see the benefits that the Metro can add or bring to their businesses,” he says.
But the various developments along the Metro network have to get their act together first. The lack of sufficient infrastructure support has resulted in an intense property value correction at Jumeirah Lakes Towers in comparison to other developments in the vicinity.
“Though the towers are ready, a Metro station alone cannot ensure a rise in property prices. It depends on the quality of construction, parking, retail facilities, and proper roads,” adds Masand.
While that may be the case, based on latest market trends landlords have already started factoring in a Metro-driven lift to their asking rates.
Rather than base rates on hard facts, some believe that price levels are plateauing out and are refusing to negotiate below what they perceive to be their property’s ‘real’ market value.
“They’ve reached a point where they’d rather keep their units empty than rent them out at lower prices,” says Masand.
But this will only work for those landlords who can afford to let their properties remain empty until they come across a tenant who is willing to meet their asking rates. But for those with less financial capacity to sit it out, such a strategy could prove ruinous.
A glut of office stock is projected to hit the market, and landlords are well-advised to factor a degree of flexibility into their negotiating terms.
They could make a decent start by offering longer contractual terms to tenants. “In some instances, companies and landlords are now going for leases lasting even eight to ten years.” Even tenures of three to five years would represent a marked improvement from the earlier one-year norm.
Masand takes due notice of several Dubai real estate reports that have
come into the public domain. While
each cautions about a looming over-supply in office capacity for Dubai by 2011-12, “none has evaluated the kind of demand that can be seen over the next two to three years,” he says. For international companies seeking a presence in the emirate, shell-and-core space is ideal to design interiors set to certain specifications.
“If it is an office with ceiling, flooring and partitions that don’t meet their specifications, they will simply tear it apart and redo the interiors. A lot of companies still approach us for bare shell-and-core.”
However, there are also those corporate tenants looking to set up operations out of new premises but without incurring additional costs.
“Some companies have also approached us seeking partially fitted out units, which can be up and running in around 20 days time,” Masand states.
To sum up, there are still plenty of potential tenants out there to fill up all those gleaming new office towers. Now, only if landlords were willing to meet them half way in their demands.
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