Dubai Investments Park rides out rough market conditions

Being a wholly-owned subsidiary of Dubai Investments, DIP has never had to face liquidity constraints to get on with the many phases spread across the 2,400-hectare development.

"Whenever we lease 80 to 85 per cent of each phase, we move on to the next, this gives us the advantage to develop the Park without any financial difficulties," says Omar Al Mesmar, general manager of DIP.

"With regard to project finance, we are supported by our parent company and other financial institutions."

The earthworks in Phase Eight is now complete and will be used as a logistics and distribution hub. Spanning 500,000 square metres, this phase costs Dh300 million and will have a total built-up area of 2.8 million square feet.

Keeping the volatile market trends in mind, the developer intends to make the logistics and distribution units flexible — they can be converted into industrial units as well.

Leasing incentive

However, the long-term leases — of 30 years and renewable up to a further 30 years — will prove an incentive to industries looking to make the most of the deal. "When you invest in millions, you need longer leases for good returns and to break even on your investments," says Al Mesmar.

Phase Seven, dedicated for workers' accommodation, is fully leased and is nearly 95 per cent complete. "The contractor will hand over Phase Seven by the end of April. Within 36 months, we will hand over all phases in DIP," states Al Mesmar.

Demand for space in the Park's industrial zone has been robust, with around 17 million square feet already leased. Tenants have been attracted from industries spanning manufacturing, processing, assembly and distribution. While pre-built industrial units ranging from 500 to 1,000 square metres are available for lease, investors can also ask for purpose-built units in the industrial complex. "We were not anticipating good demand this year," the general manager adds.

"However, since December 2009, we have witnessed reasonable demand from end-users who are approaching us looking for huge space. They want to develop facilities on their own for their core business."

Commercial offers

However, at the commercial zone, a different story is unfolding. While the master-developer has leased out all the plots falling under this zone of around 8 million square feet at a cost of more than Dh1.5 billion, the sub-developers are, understandably in the present climate, finding it hard to fill up the units. The average rental for the DIP office units is pegged at Dh60 per square foot.

"We are trying to promote the office towers, as a result we've reduced the rents as well as service charges," admits Al Mesmar. "The situation is quite difficult."

Robust residential demand

Meanwhile, DIP's residential zone has gathered momentum with phases one and two of the Green Community (a joint venture between Union Properties and Dubai Investments) having been handed over and Ewan Residences (developed by Lootah Real Estate) complete.

A sub-developer, Manazel, has delivered Dunes Village while the Dubai Investments Real Estate Company (DIRC) has handed over Phase One of Ritaj. While all residential developments were scheduled to be completed by 2010, evidence on the ground belies this. Unwilling to comment on the progress, or lack thereof, achieved by the sub-developers, the DIP general manager states matter-of-factly, "There are rules and regulations related to the infrastructure and the federal law that create obstacles for the developer."

One pet peeve of most master-developers is coping with sub-developers who are struggling to make payments. This is, however, not the case at DIP, where plots for most of the residential projects were sold years ago.

"Most sub-developers have made 80 to 85 per cent of their payments, we are willing to restructure their remaining payments, even though the plots were sold leasehold," assures Al Mesmar.

Attracting investments

Of the 2,400 hectares that make up Dubai Investments Park, 1,700 hectares have been leased.

The Park has attracted investments worth over Dh21 billion in its residential zone. Total investments by the approximately 1,100 plus tenants and 1,050 sub-tenants has crossed Dh65 billion. Of the 11 hotels within the Park, two are operational.