Age is emerging as the key factor in deciding the rents that the high-rises on Shaikh Zayed Road – Dubai’s original Central Business District (CBD) – can now command. A clear gap, real estate sources confirm, is building between the relatively new high-rises and those which got onto the market in the early part of the last decade.
“While average offices rents in the CBD declined by around 4 per cent during 2012, a number of premium properties actually achieved rental growth over the course of the year due to the comparative quality of their accommodation,” said Matthew Green, head of research and consultancy at the property firm CBRE.
“Average CBD rents have reached Dh1,450 a square metre per annum — however, select premium properties are commanding notably higher rents as a fragmented marketplace prevails. Occupiers continue to seek out the best quality stock, driving landlords of ageing towers to reduce their rents in order to remain competitive. On the flipside, new market entrants are able to command higher than average rents, by offering occupiers more efficient spaces and a better quality of product.”
It is into this two-tier mix of the old and the new that the Shaikh Zayed Road’s latest high-rise development – The Maze tower – got delivered. It features 55 floors of which 25 levels are dedicated for commercial space. Within this, the developer, Al Rostamani Group, has set up the corporate head office and has its own companies take up 10 floors with another five floors for multinational entities.
“Each floor has the potential to house four individual offices at 1,600 square metres per office,” said a spokesperson at Al Rostamani Group. “The 25 floors of residential apartments are at a 93 per cent occupancy and commercial space is witnessing a steady uptake (and) which we aim to have full occupancy by mid-2013.
“Staff from across the many companies within the Al Rostamani Group - that includes property development, currency exchange services, automotive, trading, travel, telecommunication, securities, construction and electrical engineering — have already started to work from The Maze.”
The project was launched in 2007 when the Group’s Board of Directors decided to consolidate the varied interests into one “landmark headquarters”.
“The project was completed by several designers with varying technical expertise including UK’s maze design specialist, Adrian Fisher, with inputs from Hassan Al Rostamani, vice-chairman of the Group, members of the board, DAR Consultants, Planquadrat Architects, Insignia Design Consulting, MCI, GMC Stone and Equidiff,” the spokesperson added. Construction was carried out by Al Rostamani Pegel, the group’s civil engineering and construction arm.
“The Maze Tower is very much an Al Rostamani Group vision that has come to reality and a showcase to the capabilities of our business units.”
Incidentally, the Group built one of the original set of high-rises on Shaikh Zayed Road through Twin Tower Building A.
Since the fourth quarter of 2012, demand for prime office space in Dubai has seen marked improvement, with local and GCC corporate entities leading the way. There have also been enquiries from businesses in the financial services and retail sectors either looking for a base in Dubai or new premises.
But prospective tenants are not about to take up any vacant space that is out there. There is a flight to quality. “The emergence of strong tenant demand for Grade A space creates polarity in the market,” said Green. “The lack of available space within high-quality single-owned assets is also expected to encourage some new development starts in the office sector despite a prevailing market wide vacancy rate of around 47 per cent.
“Single-owned properties that can offer tenants a good sized floor-plate, high efficiency space, and quality parking and facilities are actually in very short supply in the CBD, resulting in occupancy rates of close to 100% for some of the more attractive assets. This scenario expected to drive further rental growth for premium products.”
Will it be enough to drive rentals on CBD anywhere near the peaks of 2008 is a moot point. That year, prime office space on CBD could command Dh5,500 per square metre. But the Dh1,450 a square foot prevailing on prime properties now would be a good base to climb further through the rest of the year.