Dubai - In Dubai, where almost half of the offices sit empty, the head of a state-owned business zone says there is room to build the world’s tallest office tower.
Ahmed Bin Sulayem, the chairman of the Dubai Multi Commodities Centre (DMCC), said the Persian Gulf business hub could still attract tenants and investors with such a project because many of Dubai’s buildings were unsuitable for large businesses.
Bin Sulayem helped lead the development of the DMCC’s 68-story Almas Tower, Dubai’s tallest building when it was completed in 2007. The tower was full and had a waiting list for tenants, he said.
“The crisis has shown us that well-designed and thought out developments will always hold value and demand,” Bin Sulayem said.
“We will be running out of space and the world’s tallest commercial tower will help attract more companies.”
Dubai’s speculation-driven property boom saddled the sheikhdom with thousands of offices that are unattractive to businesses because of their design, location or ownership.
Companies looking for at least 5 000m2 of office space were frequently unable to find what they wanted and were increasingly looking for “built-to-suit” deals, property broker Jones Lang LaSalle said in a report in April.
Another broker, CBRE Group, said about 45 percent of the city’s offices were empty.
Mathew Lomax, the director of property at DMCC, said the skyscraper at the business zone would be at least 520m tall and was the centre of a 107 000m2 development that would include commercial buildings for companies that required their own facilities.
The zone authority plans to sell part of the tower, to be built over five years at a cost of about $1 billion, and keep the rest to generate rental income.
“We will go around and make sure that multinationals are aware of this building before we go to the rest,” Bin Sulayem said. “They tend to need large space and plan expansion years in advance.”
The cranes will not be going up anytime soon. The skyscraper has yet to be designed, a contractor has not been commissioned and financing has not been secured. Bin Sulayem said funding would probably come from advance sales as well as loans and Islamic bonds.
The need for big corporate office spaces did not justify a project like the one DMCC envisioned, said Matthew Green, the head of United Arab Emirates (UAE) research at CBRE. The higher costs of building a tall tower forced the owner to ask for higher rents and selling prices, he said.
“Why the tallest tower?” he said. “It’s going to be inefficient and there’s no point in building an inefficient building in a great location. Corporate occupiers are not looking to spend fantastic amounts of money.”
Bin Sulayem said the DMCC was in talks with “seven serious banks, and we have a number of international banks that want a piece of it”.
He said that investors had called him about buying 25 floors in the tower, even before a design was available.
The proposed new tower for the DMCC would have the advantage of being in an area that offers companies tax-free status for 50 years with no restrictions on capital repatriation and simpler regulation.
Dubai has set up several of the districts for specific industries, known as free zones, where companies can retain 100 percent ownership.
Outside the areas, companies can only operate if they are majority-owned by UAE citizens. – Bloomberg