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Dubai financial centre to cut rental costs for tenants
Some tenants to get 50 percent discount say officials.
December 12, 2010 9:44 by Reuters
Dubai International Financial Centre (DIFC) will introduce a new rental pricing structure in January that could see some tenants get 50 percent discounts, officials said on Sunday.
The tax-free business hub, which is home to 780 businesses including global financial services firms, will bring in the new fees structure to increase transparency.
“Some clients will receive a discount of more than 50 percent,” Marwan Ahmad Lutfi, deputy chief executive and head of business development, told reporters in a conference call.
“Previously, there were no standard rates across the entire district of the DIFC. What we’re trying to do is eliminate inconsistent pricing so that pricing isn’t dependent on when a company came into the centre.”
Per square foot rental prices in the DIFC vary, officials said, with firms that signed long-term leases ahead of the centre’s opening in 2004 paying a fraction of those that signed up before the financial crisis struck, when prices peaked at $200 per square foot.
Under the new structure, the most expensive DIFC-owned property will cost $76 per square foot.
In a September report, property consultancy Jones Lang Salle said vacancy rates in Dubai’s financial district — defined by Jones Lang Salle as including the DIFC and Burj Khalifa — will rise from around 12 percent to a peak of between 30 and 40 percent over the next 12 to 18 months.
Jones Lang Salle said the rate was expected to fall back to 10 to 15 percent by 2014.
DIFC officials on Sunday said office occupancy is 95 percent in DIFC-owned buildings. Non-DIFC owned buildings account for about 35 percent of leasable office space in the DIFC.
Tenants can choose to switch to the new contracts from January or wait for their existing leases to expire.
“This will allow clients to plan for their long-term growth,” said Chirag Shah, DIFC head of strategy.
“A lot of clients have held back because of uncertainty, whether it was over pricing or operational costs. This will remove that uncertainty.”
In May, DIFC Investments, the parent company of the DIFC, posted a $562 million loss in 2009 due to writedowns related to the group’s investment portfolio.
(Reporting by Matt Smith; Editing by Amran Abocar)