The MENA region is seeing an explosion in the construction of office blocs. Without exception there is a strong demand for high grade office blocs throughout the region. Where Grade A office blocs have been constructed occupancy rates are 98% or above. In the Gulf, the explosion of office construction is on such a scale that some are concerned about an eventual oversupply despite the current strong demand. In the Levant demand is also strong.
Beirut
The residential and retail sectors are currently seen as booming in Lebanon, but office construction as, Elias Harb, owner of Real Estate Magazine, told Executive is “non-apparent”. The existing stock of office space in Lebanon, is inadequate, as most of it is old and of an inadequate size. The reason for this, Harb explained, is because most people who built office buildings in Lebanon, built them for their own use and to their own specifications. Harb said that he is “not aware of any new business centers being developed. The BCD [Business Central District] is quite poor right now.” Mohammed Arayssi, of Batimat Architects, believes that it will take some time before offices will come back to the real estate market. However, Arayssi believes that there is a demand for the construction of large, high-end office space. “When you are in such a specific niche you will always have demand, at least what there is now, is insufficient for the companies that could [potentially] come and fill the space.”
Dubai
Dubai has occupancy rates of 97-99% in most available office buildings and there is limited delivery of new office accommodation, leading to complaints of persistent undersupply. However, construction of office blocs is occurring at a phenomenal pace. There is a commonly held view that very soon supply will match demand and then supersede it. But for the time being the office sector is currently experiencing excess demand. By 2009 a tripling of office space will increase total supply from 1.6 million square meters to 5.6 million square meters. Real estate experts believe, however, that for the meantime demand from companies around the globe that want to locate in Dubai will soak up a lot of this increased office space. A large injection of supply will begin to apply downward pressure on capital values as early as the third or fourth quarter of 2008, as asking rents may fall.
Abu Dhabi
Since 2000 office supply grew 50% to 460,000 square meters of gross floor area (GFA). By 2011 it is expected to increase by 85% to 850,000 square meters of GFA. Currently there is some 415,000 square meters of office space under construction, but there is insufficient supply and this has led to a rental increase of 30%, in most office accommodations between 2005-2006. The main problem on the supply side is that there are few purpose built primary grade office buildings in the city and occupancy rates in purpose built office blocs are 98%. The quality of city’s remaining stock is low, lacking in communication systems, services and floor plate design. All buildings suffer from a lack of dedicated parking facilities.
Kuwait
Currently an additional 300-400,000 square meters of office space is currently being developed in Kuwait. There is 400,000 square meters of office space currently occupied in Kuwait City and the demand is high. According to Harb, it is “the most attractive market, despite the fact it is the most expensive in the region.” This is due to limited supply as the government owns most of the land. Worries about who will occupy the new office buildings under construction are answered with the mantra known from Dubai: “Build them and they will be occupied.”
Riyadh
There is a current market trend of unsatisfied demand for primary grade office space. Commercial rent rose by an annual average of 15%. Legislation has been brought into place to end the practice of converting villas into offices, this has increased the demand for purpose built office space.
Doha
The main feature of Doha’s office market is that government organizations tend to lease rather than owner-occupy space. It is anticipated that companies will look to functional and efficient mixed use developments.
Amman
The Jordanian capital currently lacks a clear Central Business District. Primary grade office space is scarce and demand for high quality office space is on the increase. Current office stock is mainly poor quality.
Damascus
Demand for class A office space is being driven by entry of private banks and insurance companies. Most office buildings are outdated and so are being replaced with large office parks away from the city center. Demand is outstripping supply.
Khartoum
There is a shortage of primary grade A and general office space. Current occupancy rates are at 95-100% and construction is rapidly expanding.
