Emirates Reit has reported a threefold increase in first-half profits as rents and prices grew in Dubai’s long-stagnant office market.
The Sharia-compliant real estate investment trust said that net profits for the first six months of the year increased to US$34.15 million from $11.6m – a gain of 194 per cent – as rents in Dubai grew.
The news comes as the property agent CBRE reported that average prime office rents in Dubai’s central business district – an area around Downtown Dubai – rose 3 per cent in the three months to the end of June and by a total of 25 per cent compared to a year earlier to stand at an average of Dh1,884 per square metre per year.
Emirates Reit, which floated on the Nasdaq Dubai in April, said that the value of its portfolio rose by 73 per cent since the end of last year to $559.6m as the Reit purchased a major chunk of Index Tower in DIFC for $167m and the $32.1m Le Grande Community Mall in the Dubai Marina.
The Reit said that with the exception of its Index Tower offices, the majority of which are empty, overall occupancy in the rest of its portfolio increased to 97 per cent at end of last month from 93 per cent at the end of December.
At the same time, the Reit’s total passing income increased to Dh129m from Dh110m. It said that the average weighted unexpired lease term across the portfolio was now at 8.8 years.
CBRE’s data showed that the amount of empty office space in Downtown Dubai has fallen to less than 16 per cent this summer from 40 per cent last year.
Emirates Reit reported that gearing stood at 23 per cent of its gross assets and borrowing rates on its portfolio had fallen to about 3.21 per cent from an average of about 5.5 per cent.
“We are confident that demand for commercial property in Dubai will continue to grow,” said Sylvain Vieujot, the executive deputy chairman of the Reit manager, a joint venture between Eiffel Management and Dubai Islamic Bank. “There are still significant opportunities within the Dubai market to invest at attractive prices in prime buildings, which offer substantial growth.”
Meanwhile, CBRE reported that another 1.8 million sq metres of new office space was set to be completed in Dubai by the end of 2017, pushing up the total amount of office space in the city by about a quarter as projects shelved by the global financial crisis finally come on-stream.
However, the broker said that most of this would be built as strata title space, which had been sold off-plan in small chunks to investors and so would not be attractive to many corporate occupiers.
“Office stock in Dubai continues to see significant growth,” said Matthew Green, the head of research at CBRE’s Dubai office. “However, while there is a large pipeline of new supply, the majority of this space will be negatively impacted by its strata ownership title. During 2014, almost half a million square metres are scheduled for completion, with more than 30 per cent of this total to be delivered in the Business Bay area.”
Europe a popular investment for the Middle East
The amount of money being spent by Middle Eastern investors on property in Europe rose 25 per cent in the first half of this year to €5.9 billion (Dh29.19bn).
According to a report from Colliers International, the figure equates to about 13 of all cross-border transactions from outside the continent and puts Middle Eastern investors as the second-largest group of non-Europeans investing in European property after North Americans.
Key transactions during the period include the Qatar Investment Authority’s acquisition of five hotels in Cannes, Madrid, Frankfurt, Amsterdam and Rome; the Qatar Investment Authority and China Life Insurance Company’s purchase of 90 per cent of Clifford Chance’s 1 million square foot head quarters in Canary Wharf in London’s Docklands; and the Qatar Armed Forces Investment Portfolio acquiring the Hotel Renaissance in Barcelona for €78 million.
lbarnard@thenational.ae
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