Less than a third of the office space in the Burj Khalifa will be ready for tenants to move in by the time the world's tallest tower opens to tenants in March. The building has 52,490 square metres of offices, representing about 10 per cent of its total floorspace, according to data from Emaar Properties, the developer behind the 828-metre-tall tower.
"This is an exceptional property and probably the most prestigious address in the world, but it is entering the market at a challenging point in time," said Roy Cherry, the vice president of research at Shuaa Capital, a Dubai-based investment bank. "I would expect the offices component to move towards the 70 to 80 per cent occupancy mark over the course of the next 12 to 16 months," he said. The Dubai office market, which boasted 100 per cent occupancy fewer than three years ago, has been hurt by the property downturn. The slump has sent rents tumbling by between 30 and 60 per cent from their peak as scores of new office buildings have been completed in the past two years.
The economic slowdown has also forced many companies to cut jobs, further reducing demand for office space. The Burj Khalifa, as the tower formerly known as Burj Dubai has just been officially named, also contains 900 flats covering a total of 288,000 sq metres, all of which have been sold. It is not yet clear how many of them will be occupied. "The oversupply in Dubai is massive, specifically in the freehold areas," said David Schuin, the commercial manager of Sherwoods, the property broker. He said the Burj offices may take some time to fill. "I don't know if people realise how big the tower is."
In addition to the 21,181 sq metres of offices in the tower, a 13-storey annex at the base of the building provides another 31,308 sq metres of office space. With the tower's tapering design, its floorplates range between 1,300 sq metres on the lower floors and 743 sq metres on higher ones. "We were asked to complete and fit out about 30 per cent of the office space. The remaining 70 per cent of offices will be delivered core and shell," said Didier Bosredon, the project director for Besix, one of the tower's three main contractors. "I don't know how they will be commercialised."
Besix is fitting out six floors. It is not known how much of this space has been let by its owners. The remaining 31 floors are being delivered as "shell and core", which means they are not yet ready for occupation and their owners or tenants will fit them out. Joseph Garwood, an associate director at the property consultancy DTZ who is in charge of commercial leasing, said the higher floors may prove more popular for private offices, while the lower floors have larger floorplates that are likely to appeal to corporations.
"Fitted out space is more preferable in this market. For functionality, I think that the lower floors are going to be appealing to end-user occupiers like banks or other corporates," he said. "But the higher you get, the more prestige will be attached. It may be somebody's private office." Without any pre-lettings announced, brokers are unsure about what rents the tower will command, its tenant profile or whether it will threaten Grade A office buildings in the area, including the Dubai International Financial Centre (DIFC).
The Burj Khalifa "will be occupied by multinationals that are looking for a prestige address," said Mr Schuin. Occupancy levels will also depend on the cost. "People are going to pay a premium, but the premium has to be reasonable," said Ahmed Saidali, the head of investment at CB Richard Ellis, one of the world's largest commercial property brokers. But DIFC is likely to remain the preferred location for many financial companies because of its free zone status, which offers financial incentives to tenants.
"The quality of the building will be high, but DIFC is very much the number one office location because it is a legal jurisdiction," said Craig Plumb, the head of research at Jones Lang LaSalle, the international property consultant. Government-related entities could be the first tenants of the building, said Mr Cherry. "I am sure a lot of companies would love to be there, but it is really hard at the moment to justify a shift if that means increased expenses," he said.
A spokeswoman for Emaar's public relations firm said the company was not available to comment. @Email:firstname.lastname@example.org