Construction in Dubai is a matter of peaks and troughs

Peter Bill
5 Feb 2010

You only get to ride halfway to the top of the world's tallest tower in Dubai for your £20 ticket, despite the newly opened tourist experience being billed At the Top. Even so, take it. It sure beats the slow climb up the Empire State Building.

After an ear-popping 55-second ride, the lift opens onto the 124th-floor viewing platform. From 1400 feet up, you can gaze down in wonder at the hundreds of becalmed tower cranes and the dozens of half-finished buildings.

Gaze upwards and you can just see the top of the tapering silver tower. Then it is easy to see why the ruler of Abu Dhabi demanded his name be attached to the Burj Dubai, hastily renamed the Burj Khalifa just before it opened on 5 January. This was the price in kind demanded by Sheik Khalifa bin Zayed Al Nahyan for guaranteeing the $10 billion (£6.3 billion) debts of his profligate neighbour state.

About $2 billion is owed to British builders and consultants. Lord Mandelson is due to visit this month to press the ruler, Sheikh Mohammed bin Rashid Al Maktoum, to pay up. Good news. But two days ago, property agent CBRE reported bad news for developers, saying that office-leasing has more than halved and there are “few signs to suggest any imminent upturn”.

Even so, beyond the stalled projects, there are few visible signs of the debt crisis that hit the tiny Gulf state last November. The airport is busy. The traffic is heavy. The gigantic Dubai Mall, which sits by the tower, was teeming with shoppers last Friday evening. Bloomingdale's opened this week. Primark, M&S, Waitrose and Debenhams are among the 1200 stores in a busy centre the size of 50 football fields.

Two weeks ago there was a top-level government shake-up. The ruler's uncle, Sheik Amhed bin Saeed, who is chief executive of the highly successful Emirates Airline, is taking a more central role. This has prompted “light at the end of the tunnel” headlines — something that property agents Jones Lang LaSalle agrees with.

Last week JLL issued a “glass half full” report, suggesting office rents in the central business district at least, were stabilising after a 44% fall. “Vacancy rates in CBD are less than 10%,” says Blair Hagkull, JLL managing director for the 100-strong Middle East office that sits in the shadow of the Burj Khalifa.

The Canadian says this year will be one of “selective stability”. “Companies still see Dubai as the regional hub for the Middle East. Prime office space has now become affordable and attractive to these prospective tenants. We are now seeing a return of interest.”

But the JLL report also shows that 20 million square feet of office space planned to be complete between 2009 and 2011 has simply evaporated. That statistic helps explain why, when you look down from the top of the Burj Khalifa, you don't just see tower cranes at rest; the outer landscape is pockmarked with holes in the ground.

Boom time for the agents but not so brolly good for investors

Knight Frank signalled the start of the next commercial property boom at a breakfast presentation in the Dorchester this week by handing out free umbrellas to departing guests.

If the blue-blood agent's 2010 forecast of a 43% price rise in City office blocks and a 31% rise in the West End prices comes true, what price a few freebies? Agents' fees tend to be a fixed percentage of the sale price.

If you are looking to take space in the City, the news is bad. Prime rents will rise 19% this year to £52.50 per sq ft — and by a total of 52% to £67 per sq ft by 2014. This is assuming you can find the space. Annual demand averages 3.2 million sq ft; supply in 2010 will be just 1.1 million sq ft. If you want to take space in the West End the news is as bad. Prime rents will rise by 11.5% to £72.50. This will be brought on by a dearth of new development, and a rising demand from hedge funds, now back from the dead if not back in public favour.

If you are looking to invest in property, the news is, yes, also bad: the world and his wife are too. Professional investors from around the globe are scouring London, says Knight Frank.
If you are thinking of sticking a few thousand in property unit trusts, the news is...well, you can guess. Funds run by the likes of the Pru, Henderson and Aviva can barely spend the flood of cash.

Any good news? Indeed. The sun is shining again for property agents. Who needs an umbrella?

On the track of safeguarding Olympic legacy

Dinner this week with those who have been given the task of ensuring that the site of the 2012 Olympics does not turn into tumbleweed city.

This is the honeymoon period for the Olympic Park Legacy Company, chaired by feisty Baroness Margaret Ford and managed by emollient American Andrew Altman. The duo appear confident of landing an operator for the stadium by the year end: someone who will do more than turn it into a dreary athletics track.

Reports that West Ham FC has been in touch were confirmed. But many other sports and entertainment companies are putting forward ideas, some of which are apparently not completely crazy.

Homing in on a square' deal

Prince Charles will be pleased to learn that the 10,000 new homes to be built on the Olympic Park after 2012 will have front and back gardens, be no more than three or four storeys high, and be laid out in the classic style of squares and crescents.

This will make a pleasant contrast to the athletes' village, where the eight-storey blocks are rearing up even as you read. Even more pleasing to the Prince is the thought germinating within the Olympic Legacy Company that these homes should be built to a recognisable “London” style. The first architect to figure out what that means deserves the job.

Sainsbury's is tiring of Holborn

J Sainsbury has for ages been trying to extricate itself from a lease taken on that glass semi-circular office block in Holborn Circus — the one that replaced the old Daily Mirror tower, whose roof Robert Maxwell used to urinate from after debouching from his helicopter.

The supermarkets giant is keen to move north into a purpose-built HQ in the King's Cross development. But the landlord will sting them if they move out without finding another tenant. Rumours are growing that the grocer has finally persuaded someone — perhaps lawyers Nabarro, perhaps not — to move in.