Friday, September 05, 2008

Dubai likely be most expensive commercial property location in the world

Dubai, popularly known as the city of tall towers, may soon prove to be the most expensive commercial real estate location in the world, reports The Gulf News.

The latest reports have already placed Dubai as the sixth among the list of most expensive office space in the world, behind other commercial big-hitters such as London, Moscow, Hong Kong, Tokyo and Mumbai.

The world's most expensive location at present, London, has noticed that investors are getting timid, as they are passing through the effects of a global credit crunch. The gloomy financial predictions and stringent measures, have led to a plunge in commercial property values, with a recent 20 percent decline noticed in values.

In the meanwhile, in the shiny and optimistic skyscrapers of Dubai, the sky is the limit, as far as real estate is concerned. High demand for office space is driving the prices sky-high, while the supply has been lagging behind.

It is likely that the companies may think twice before setting up large headquarter type of offices in Dubai, due to the spiraling costs. This may prompt establishment of smaller businesses, giving investors a presence in the Middle East, although not a head office.

A drop in prices is unlikely before 2012, but the status of UAE thereafter, is not known. At present, Dubai has 19.1mn square feet of commercial space, boasting a 98 percent occupancy rate. Most of the commercial properties being sold are given off off-plan to developers, striving to keep pace with the demand.

About 75.8mn square feet of space is likely to enter the market within 2012, and then with more office space finally made available, it should be watched as to what happens to prices here and abroad.

There may not be many other places, other than Dubai and UAE, which has so much development planned. The Dubai International Financial Center, Burj Dubai complex and Business Bay, are all places specifically designed to lure companies towards establishing their shops in Dubai.

The cost of building supplies will continue to rise, as the global market continues to slow down, but, this may push prices even higher. Although this could also bear an impact on the building schedules here, a quick glance at the mixed-use and office specific developments being announced regularly in UAE, indicates the buoyancy and optimism in the market.

Although the inflation touched 11.3 percent towards end of last year, while the rent surged 17.5 percent, these have never hindered the growth of property market in 2008. According to recent study, Dubai has witnessed a 136 percent rise in property sales during the first half of this year, and this is bound to continue.

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