For most people no introduction is necessary to the Burj Khalifa. It is the world’s tallest and most glamorous feat of modern sky-scraping architecture. It is what it was always meant to be; prestigious, unfortunately during its five years of construction people’s appetite for prestigious properties in Dubai dried up almost entirely.
Sales apparently weren’t a problem amidst the hype of a tower about to open; developer Emaar had apparently sold 90% of properties in the development before it opened, but now owners of said properties are having great difficulty in finding tenants, so much so that one broker marketing their homes has slashed rental rates by as much as 40 percent.
The cost of renting a luxurious studio (floor to ceiling windows, marble and wooden floors) is down to 6,666 dirhams ($1,815) a month, one-bedroom apartments down to 10,000 dirhams per month ($2,700), and Two-bedroom apartments down to 15,833 dirhams ($4,250) per month, according to Dubai based Better Homes.
Some 9 months after the fireworks and glamour or opening night, only 75 of the 900 available residential apartments have tenants, said Laura Adams, a residential sales and leasing adviser with the firm. The firm cited proximity to The Address development, which offers serviced apartments for the same rates, as a reason for the drop.
“It was clear they wouldn’t move at market prices as they were competing with the Address next door,” Adams said in an e- mailed response to Bloomberg. Ironically The Address is also operated by Emaar Properties PJSC.
The fact that Burj apartment owners must pay an additional 53 Dirhams per square foot in annual maintenance fees for the upkeep of communal areas, swimming pools and gyms was also a factor in its lack of ability to compete, said Adams.
Crying shame springs to mind for this story: The Burj Khalifa is home to the first Armani hotel ever, along with 144 Armani-branded residences and apartments offering smart home-entertainment technology, wine coolers with recessed and dimmable lighting and access to the tower’s “Sky Lobbies,” which houses gyms, indoor and outdoor swimming pools, Jacuzzis, a library, Cigar Club and convenience store. It truly is a building worthy of commanding the highest rents in the world, if only they could lift it and move it to Monaco, London or Beijing.
When the concept of Burj Khalifa arrived, it aptly commanded its own press release amidst the gasps of speculators from around the world. At the time there was a “we can do anything attitude” in the hottest property market in the world, as the world’s tallest tower vied with indoor ski resorts in a bubble-like dome and man-made islands in the shape of the world for buyers’ dollars.
During the 5 years the Burj took to construct the world economy and its credit markets collapsed, speculation dried up and the Dubai property market collapsed in on itself. Property prices in the emirate fell 50% and hundreds of developments — including the aforementioned indoor ski resort — were cancelled. The view from the Burj Khalifa’s 124th storey observation tower is just one casualty of the crisis.
What should be a view across the top of one of the world’s most impressive skylines is a view of the shocking failure of the Dubai property market.
Prices have fallen by more than 50% according to Dubai based property consultancy Landmark Advisory. According to the firm, apartments are now selling for no more than 3,300 dirhams a square foot, 67 percent less than the 10,000 dirhams at the 2008 peak.
“These rents make sense, especially since rents in Dubai have been declining over the past two years,” said Jesse Downs, director of research at Landmark.
“I don’t think we will see the premium for the world’s tallest tower until occupancy levels increase,” Downs said.
Potential tenants may also be lured by the apartments’ smart home-entertainment technology, wine coolers with recessed and dimmable lighting and the access to the tower’s “Sky Lobbies,” which houses gyms, indoor and outdoor swimming pools, Jacuzzis, a library, Cigar Club and convenience store.
“Rents are low at the outset in most buildings because it isn’t attractive for a tenant to move into an empty tower,” Downs said. “At the market peak, people were renting in Jumeirah Lakes Towers for that much. It goes to show how much the market has changed here, but that isn’t necessarily permanent.”
Photo credits: Suwaif via Flickr