High rents stall start-ups in capital

Despite given cash to open their own businesses, some Emiratis still struggle to find the right work space.

Hamad Abdulla secured a Dh800,000 business loan from the Khalifa Fund, but has been searching for a suitable site for a year.

ABU DHABI // Many young entrepreneurs given funding to launch their own projects have had to put their businesses on hold because of a shortage of commercial space and high rents when it is available. Almost 30 business proposals that have been approved for financial assistance from the Khalifa Fund to Support and Develop Small & Medium Enterprises have not yet materialised as the owners struggle to find somewhere suitable within their budgets in Abu Dhabi. Rent increases and high demand have squeezed the capital's commercial and residential property market.

While it was disclosed recently that commercial rents in the capital had fallen in some districts by more than 20 per cent, high-quality office space remains at a premium. Most of the Khalifa Fund's projects are in the city. Hamad Abdulla, who was given a Dh800,000 (US$218,000) interest-free loan by the fund to start a shop for children's events, has been searching for premises for a year. "I can't find any place with the budget I have - even the cheapest options are so expensive," said Mr Abdulla, 31. "And if I rent something on Electra Street, for instance, there is no parking.

"After all this study and hard work, the issue of a place to rent brings the whole project to a halt. It's stressful." Mr Abdulla also said the complicated licensing procedure involving several government entities to start a new business was a further hindrance. "I can't start a project knowing that I will just end up burning myself in the process. This money I have is a loan and I can't take a risk with money that isn't mine and lose it all because of high rent."

A similar problem was encountered by Abdulla al Shaiba around the same time, but he was lucky. His good fortune came at a price, however: his tiny 1.85sq m office on Corniche Road for his consultancy and training firm is costing him Dh140,000 a year. "The problem isn't just about rent any more. It is about finding a location in the first place, and one that is compatible with your business needs," said Mr al Shaiba.

The Khalifa Fund, which was established a year and a half ago, has been instrumental in enhancing the potential of national entrepreneurs and supporting the country's economy by helping the young generation start businesses. About 3,000 applications have been received since the fund was founded. Funding for 176 projects at a loan value of more than Dh300 million have been approved, of which 27 per cent are owned by women.

Nemah al Kuthairy, one beneficiary of the help for female entrepreneurs, runs a successful chocolate factory and retail business, but, like many others, struggled to find premises at first. "It took me two years to find a location," said Mrs al Kuthairy. "Rents were really high and lack of vacancies were really breaking our backs." She was eventually forced to settle for an obscure first site for her start-up, in the Al Jazira Sports Club complex, though she now has a second outlet in the Hamdan Centre and is negotiating a third.

The chief executive of the Khalifa Fund, Dr Ahmed Khalil al Mutawa, said support was given as much as possible to young entrepreneurs facing hurdles to achieve their aims. "Usually when approved applicants experience any difficulties involved in starting up, we give advice or work with other entities, but finding places to rent, particularly in Abu Dhabi, is difficult at the moment." Help was also given with licensing procedures, he added.

Dr al Mutawa said the fund was planning to set up a one-stop shop at its Abu Dhabi office where entrepreneurs could be guided through the whole licensing process. Statistics showed that one start-up in three did not survive beyond two years. To try to improve that figure, the Khalifa Fund offered advisory services and training on top of funding to increase chances of success. Mr Abdullah said the Government and authorities should encourage new businesses by relaxing requirements and fees for Emirati entrepreneurs.

"We are the sons of this country, and we want to invest our money for its development, and that's a good thing for both of us." [e-mail]