Despite the political turmoil of 2005, Lebanon’s real estate sector saw activity and prices remain relatively stable. Solidere sold more land than ever before and both Gulf Arabs and Lebanese nationals continued to invest in hot properties. The Beirut Central District remained (and still remains) the axis around which everything else revolves, and experts predict the short term can only get better.
According to the Lebanese Order of Architects and Engineers, the number of construction permits and overall construction experienced a dip compared to 2004 levels. By November 1, 2005, 9482 permits had been granted for a total construction area of 5,839,354m2, while for the whole of 2004, 11,258 permits were granted for a total area of 7,719,348m2.
About half of all permits were issued in Mount Lebanon (4,657), followed by south Lebanon (1888), Nabatiyeh (930), Beirut (913), the Bekaa (799), and the north (295). In terms of space in square meters, Mount Lebanon led the way (3,116,845m2), followed by Beirut (968,601m2), south Lebanon (648,742m2), the north (422,876m2), the Bekaa (375,687m2) and Nabatiyeh (297,603m2).
All things considered, Solidere performed remarkably well in 2005. While much of Beirut and Lebanon appeared to adopt a wait-and-see attitude, Solidere sold some 300,000m2 of land in the downtown, more than ever before. The price per square meter of built up area (BUA) in the Beirut Central District (BCD) increased from some $1,000 in 2000 to $1,200 last year and some $1,400 today. The price is even higher along the seafront, where hardly a vacant plot of land remains. An equally luxurious fourth complex, as well as a handful of luxury hotels (including the Hyatt and Hilton) will, next year join the high-end residential Platinum, Beirut and Marina Towers. Worth some $1.5 billion in investments, the area overlooking the marina has already been dubbed Beirut’s “Goldern Strip.” Investors who wish to develop along the downtown seafront will have to wait until 2007, for the completion of the land reclamation project known as Solidere II. However, assuming that the political and economic situation in Lebanon remains stable, they will have to reckon with m2 of BUA.
Solidere cleans up
Solidere declared over the first nine months of 2005, a profit of $51.1 million, while its increased liquidity allowed the company to reduce debts from $234 million by the end of 2004, to $130 million by the end of 2005. Shareholders were able to cash a 32% profit per share, compared to a 2% profit over the same period last year. The share price rose to $14 at the end of 2005, while experts, some say rather optimistically, predict shares to hit $20 in the near future.
According to a study by Ramco Real Estate Advisers, some 4.5 million square meters have been bought by Gulf Arabs since 2001, which represents a total of 270 transactions at an average of 17,000m2 each. About 900,000m2 were sold in 2005, which illustrates the fact that Arab investors so far remain positive about the future of Lebanon. For the first time ever, Kuwaiti nationals bought more land than Saudis.
The sale of land is not only meant for the construction of towering residential projects and hotels, but also smaller luxury villas, roughly within the geographical triangle of Beirut, Bhamdoun and Faqra. Due to the increasing anti-Muslim climate in Europe, Lebanon’s winter capitals of Faraya and Faqra witnessed an increased construction of chalets, villas and even a palace, as Arab nationals rather ski there, than in Gstaad.
Arab nationals remain among the main buyers of high-end real estate in Lebanon, yet it seems Lebanese expatriates increasingly buy and invest, especially since the retreat of the Syrian army last April. The high-end seafront residential properties are predominantly bought by Gulf Arabs, (60% to 70%), while more inland, in areas such as Saifi and Wadi Abou Jamil, about 70% of clients are Lebanese. And sales are booming. Many apartments are sold even before the foundations are laid. Marina Towers and Park View claim to have sold all their apartments, while Beirut Tower claims to have 80% sold and Garden View, 60%.
While the BCD area remains the natural center of gravity for Lebanese real estate, other major investments continued to take place along the coast, in Ain Mreisseh, Raouche, Ramlet el Baida and at the Corniche. Also, several major developments saw the light in the narrow strip between downtown Beirut and Ashrafieh, most notably the Sursock Towers, the landmark high-rise building with 500m2 of luxury apartments at Tabaris, designed by Pierre Khoury Architects.
The ongoing gentrification of Beirut with the downtown area as its center continues in other areas beyond Ashrafieh, such as Zoqat al Blatt, Kantari and the upper end of Zoqat al Blatt, where investors have bought large apartment blocks. Outside Beirut, no major developments have taken place, with the exception of Yarzeh, Baabda and to a lesser extent Hazmieh and Naccache.
Following the success of the 37,000m2 ABC mall in Ashrafieh in 2004, 2005 saw the opening of the giant City Mall at Dora and the smaller Metropolitan Mall in Sin el Fil. The City Mall measures no less than 200,000m2, of which 75,000m2 are meant for retail, including a hypermarket and department store. The Metropolitan Mall, part of the Habtoor group, offers another 14,000m2 of retail space on the market. It remains to be seen how both will perform, especially the latter in the largely untested Sin el Fil.
After a six-year delay due to political bickering, 2005 also witnessed the go ahead for the $120 million Souqs project in the BCD. Due to be completed by 2007, the Souqs will offer another 60,000m2 of retail space on the market. While the rent in ABC and City Mall lies at around $800m2, the price per square meter in the Souqs is expected to be around $1,000.
Verdun will soon witness another retail development with the announcement that the V5 shopping mall will be open for business in 2008, adding a further 50,000m2 of retail and leisure space when it is completed (see interview with Horizon CEO Abdul Hafiz Mansour on page 180). While there is a widespread consensus among project developers and real estate experts that Lebanon does not yet offer enough retail space per capita, it remains to be seen if malls are the answer and if all available retail space can be made profitable. One thing is certain, with the increased competition, especially after 2007 to 2008, rents in certain areas and malls will come down.
The market for office space remains Lebanon’s least significant. Following the success of office buildings such as the Nahar building and Atrium, a few new state-of-the-art office buildings have been nearly completed in the BCD, including Two Park Avenue. Prices are hitting $300m2 per year and there is demand for modern buildings. The same cannot be said about first generation offices built by Solidere in the heart of the city. Occupancy rates are at about 65%, due to a combination of factors, most notably their small size and limited parking space. Rents there are much lower at some $150m2 to $250m2. Rents in Hamra or Ras Beirut too are much lower starting at $50m2 going up to $175m2. Popular among business and embassies is also Rue Charles Malek between Tabaris and the improving Sin el Fil.
The new Monot?
While six years ago you could barely get a coffee in Gemaizeh, today people jam the streets especially on the weekend to visit the dozens of café’s, clubs and restaurants offering anything from Cuban cocktails to sushi. While Gemaizeh has seen rents triple – hitting $500m2 per year – Rue Monot, which held sway for much of the previous eight years has seen prices tumble from $500m2 per year to some $250m2 to $300m2 per year. With the increased popularity of the area however, problems with noise and parking have increased and the character of the area has changed from slightly alternative to more and more mainstream. Some say the first generation bar owners and clientele are already looking elsewhere. The next cool area? The word on the street is that the savvy operators will move to Hamra with its flat, pedestrian sidewalks. Watch this space.