While 2010 saw the launching of five development megaprojects, all in downtown Beirut, this year saw a more modest track of real estate announcements.
The biggest by far was the Waterfront City project, a joint venture between Joseph Khoury Holding and the United Arab Emirates’ Majid Al Futtaim Properties, which will encompass 5,000 residential units along with a Carrefour shopping mall and entertainment complex at the Dbayeh marina. In July, Walid Bejjani, a member of the board at Waterfront City, told Executive that while investment in the first phase is around $200 million, the overall expenditure will exceed $2 billion.
In June, Solidere and London’s Stow group (the developers behind downtown’s first high-rise, Marina Towers) announced they had joined forces to create Zaitunay Bay, which will see Beirut’s marina lined with 22 shops and restaurants, all leading to a membership-only yacht club with 53 serviced residences. Prices will float at above $22,000 per square meter (sqm), the highest in the city. At the launching ceremony, Beirut Waterfront District Chairman Farouk Kamal told Executive that the budget had ballooned to more than $200 million.
From downtown to out-of-town
Solidere, the only listed real estate company in Lebanon, has around 1.27 million sqm of built-up area either under construction, awaiting permits or ‘under study’, out of a total portfolio of nearly 3 million sqm in downtown.
Elsewhere in downtown Beirut, the first mega-residential village announced it would offer 20 small-size studios, ranging from 65 sqm to 160 sqm, within one of the 22 buildings in the District//S community, due to high demand for small, fully-serviced and furnished units within the capital.
Summerland Village, the 73-unit residential section of the upcoming Summerland Hotel and Resort Kempinski, will also offer serviced apartments, introducing the concept of branded apartments to Beirut.
While branded and serviced apartments are marketed as pied-à-terre for non-residents, experts believe there is growing Lebanese demand for gated communities on the outskirts of Beirut. Seven Invest real estate developers plan to create a carefully picked community of 30 villas in their new project, The ONE, in Ain Saade, located 7 kilometers from downtown Beirut, with each villa ranging from 550 sqm to 650 sqm and including its own garden and swimming pool.
The firm’s architectural team is collaborating with fashion designer Zuhair Murad to give each villa a unique design flair, a new concept in Lebanon. With proper infrastructure already present, the group’s director Fawaz Sawaf says it will offer an alternative to those who originally planned to buy a house in the city center. “It’s the same price as a 300 sqm apartment in Beirut but you get the gardens, clean air and the larger villa with a pool,” he says.
Aside from a lack of proper infrastructure and project delays due largely to outdated and cumbersome bureaucratic procedures for obtaining permits and licenses, the main problem for developers remains the cost of land in the capital.
“Price per built-up area is dictating the increase in the price of apartments, and with the end users becoming price sensitive, developers are now having to study the market well and need to have the best combination of unit size and the best prices,” says Mireille Korab Abi Nasr, head of sales and marketing at FFA Real Estate.
Office towers developments will be more affected by price sensitivity of prime plots as they generally require a larger area of land.
A planned deal for Capstone Investment Group in downtown failed when the landowner changed his mind on one strategic parcel, forcing the developer to negotiate on another two parcels. According to developers such as Capstone’s Chief Executive Officer Ziad Maalouf, the issue is that landowners have inflated expectations regarding valuations despite the new realities in the market. While Lebanon was possibly underpriced up until a year ago, Maalouf says he believes the prices are now growing too fast.
Homebuyers have become extremely price-sensitive in recent months and are making increasingly high demands before putting their money on the table. “Everybody wants more for what they are paying,” says FFA Real Estate’s Nasr. Buyers are reasonably becoming more concerned about project specs, the right finishing and having their apartments by the date promised, since there is more competition in the market and it has become easier to compare projects, especially if they are within the same district.
But it isn’t just buyers that are price-sensitive. Though many experts believe the proposed 3 percent tax on real estate capital gains, included within the Ministry of Finance’s budget proposal submitted in October, will not pass in the near future, the government’s effort to raise revenues has sent an unpleasant ripple through the industry. It would primarily affect speculators rather than end-users, however, as investors have made exorbitant profits since property prices started escalating in 2005.
Though it will force both buyer and seller to declare the true price of a property when they register it, something usually not practiced to avoid paying higher taxes, some developers say it will just increase the asking prices of high-end projects.
Uncertainty is the most repeated word among industry experts. As such, developers who are not building in prime areas, or who owe money to banks to pay off loans, might drive prices down in an effort to sell quickly.
In the last two years, “non-professional developers” in the market have been continuously blamed for offering low-quality stock or selling at prices that disturb fair market price, but there seems to be a consensus this year that fewer projects have been launched by such groups of investors.
Sidebar: Building environmental awareness
While Greenstone is widely credited as the first developer in Lebanon to implement green construction and get certification from the Leadership in Energy and Environmental Design (LEED), it appears the concept is catching on. Developers both in and outside of the capital are looking at long-term cost saving, though many industry players complain that the term “green” is mainly used as a marketing concept and not all developers make the investment they should in these initiatives. Still, London-based green-building consultancy firm, G, has partnered with 45 buildings in Lebanon to help them attain LEED certification. Nader Nakib, chief executive officer of G, told Executive in September that investing in green technology makes sense because of government subsidies. Jouzour Loubnan, an environmental non-governmental organization that has partnered with developers such as Estates and Har Properties, hopes around 35,000 trees will have been planted by the end of this year, having launched a new program whereby for every square meter built and sold, one square meter of new forest area will be planted.