Dubai: Tapping tenant interest for a brand new commercial high-rise in what is still essentially a soft market can seem like a tall order. Prospective tenants would try to stretch the negotiations as much as possible to see whether the other party would blink first and agree to lower rates.
This is the reality staring at developers with newly completed projects in Abu Dhabi. But David Cockerton, fund manager at SinoGulf, isn't one to get unduly fazed about such matters.
His company has just released a swanky office high-rise, the International Tower, in the premium environs of the Capital Centre.
"We are currently negotiating deals for around 25,000 square metres of space, or 60 per cent of the building, with some in advanced stages of negotiations," Cockerton said. "Having just completed the building, we are satisfied with the market's response and the level of interest in our product.
"Our objective is to have a fully occupied building [steady state of around 90-95 per cent]. But realistically we know — and accept — that this will take longer to achieve than originally envisioned given the current market conditions."
This is where the building's Grade A credentials could offer a helping hand. Office high-rises that fit a similar description are still limited within Abu Dhabi commercial real estate space, and even those are scattered around the city.
"We believe that International Tower delivers a very competitive offering being capable of accommodating the highest occupation density — of one person per 8.45 square metres, while the average elsewhere in Abu Dhabi is one person per 12 to 14 square metres," Cockerton said.
"This means that companies require less space in International Tower when compared with competing buildings — in some cases making savings of up to 25 per cent. This has been achieved by designing regular, flexible floor-plates served by rapid vertical access."
Potential tenants are likely to ask for tenures of three to five years and with options to extend. But SinoGulf is flexible on this count, willing to look at shorter or longer tenancies, "which are typically an important factor in price negotiations".
Of course, there is also the fact that it forms part of the Capital Centre cluster. While the road networks within Capital Centre are operational, the surrounding roads are to open by June and the final round of soft landscaping works completed during the second half of the year.
"International Tower and Capital Centre as a whole benefit from well-established access in a largely uncongested, traffic-free location," Cockerton said. "Capital Centre is really coming together nicely; benefitting from its location adjacent to Adnec — the Gulf's largest exhibition and conference centre — and supported by a number of existing and proposed hospitality and F&B outlets. International Tower is leading the charge being the first purpose-built Grade A office tower within Capital Centre."
Was it ever considered to co-opt a hospitality element into International Tower as a hedge against the soft market conditions? "We generally prefer single-use buildings that may have a bit of service retail provided to support the daily requirements of occupiers," Cockerton said.
"A commercial Grade A building of this size requires focus on design and service to achieve the quality required. This is complemented by the well-established service offerings within both Capital Centre and Adnec. In the case of International Tower, a single-use product is the best option."
Also, the downturn came to the project's aid in another way. The developer put the project up for tendering twice, which meant that it did not have to pay the inflated prices that were there during the boom phase.
"We could have waited to get a better deal, but the product would have been launched later to market," Cockerton said. "The actual price is obviously confidential, but we believe we paid only about 10 per cent over the current market rates. Not bad given the fact that International Tower is now complete and in the market."
All that remains is to get tenants to sign on the dotted lines and take up space. With a little bit of luck and some hard negotiating, that shouldn't be difficult.
Tower owned by a fund
SinoGulf is the asset manager of the fund which developed the International Tower. It also has other commercial, residential and industrial assets in the UAE and Jordan.
"SinoGulf has already delivered three fully-leased buildings within our flagship project, Abu Dhabi Business Hub in ICAD 1, achieved in 2010 during the economic slowdown," David Cockerton said.
"International Tower is owned by a fund, which has several smaller assets located in Dubai and Abu Dhabi. But this asset represents one of our largest investments."
There is also the 22-storey Capital House, located adjacent to International Tower and offering 332 one- and two-bedroom apartments.
Last month, the main construction contract was awarded to Ali & Sons Contracting Co., and work has commenced on the site.
As for International Tower, SinoGulf will handle the asset management side, while it has brought on board Cofely Besix to do facilities management.