Kuwait tops rankings of most expensive office locations in the Middle East and Africa
1 Nov, 2006, Kuwait
The strength of commodity prices globally and the opening up of new markets as areas of production and demand is leading to sustained levels of interest from corporates to locate in Africa and the Middle East, according to Emerging Markets, a report by global real estate services firm Cushman & Wakefield.
Most of the demand from international corporates looking to establish in the Middle East and Africa is coming from the sectors of mining, and oil and gas, and, in particular in the case of Africa, telecommunications. However these corporate face huge differences across the region in terms of levels of development, business opportunities and real estate infrastructure.
Emerging Markets looks at 22 markets in Africa and 13 in the Middle East. The region accounts for 17 per cent of the world's population but only 6 per cent of economic output.
Michael Creamer, Cushman & Wakefield's head of client solutions in Europe, the Middle East, Africa and Asia Pacific, says: "In general, it is still too early to view many parts of the Middle East and Africa as emerging areas of real estate opportunity. Beacons of development and modernity are present in such places as Dubai, but in general this is the last region in the world to open up to the forces of globalisation, whether to international business or investment."
In the report's ranking of the most expensive cities for renting prime office space, Kuwait comes top, followed by the Angolan capital of Luanda and the Iranian capital of Tehran. However, Kuwait's top rent of an annual US$743 sq m is only half of the top rent of around US$1,500 sq m in London, which has the highest rental level in the world.
Kuwait's position is boosted by its current use as the base for the many companies currently in Iraq. Luanda meanwhile is the main centre for Angola's extractive industry, in particular for oil and diamond mining, and where the availability of top-grade office space is extremely limited which in turn has pushed up rental levels.
TOP TEN OFFICE RENTS IN MIDDLE EAST AND AFRICA*
* The highest rent in each country
Source: Cushman & Wakefield.
The 'beacons of development and modernity' as highlighted in the report are most notably the Arab Gulf states (Qatar, Kuwait, Bahrain and United Arab Emirates), South Africa and Israel.
As Elaine Rossall, head of business space research of Cushman & Wakefield in Europe, Middle East and Africa, says: "Most of the other markets are poorly supplied and poorly understood, with data and intelligence often limited and fast changing."
In a large number of countries, no discernable office market exists and it can prove difficult to source property when multinational companies choose to locate there. The usual options are a serviced office facility in a hotel or converted residential premises.
However, a new wave of office locations is starting to emerge in countries where there are vast reserves of yet-untapped natural resources, including Luanda, Tehran and Tripoli.
The report grades the property indicators of supply, demand and stock in the central business district into A, B, C and D. Five countries achieve three As – Bahrain, Israel Qatar, South Africa and the UAE . This indicates that there are good levels of supply, including new space, strong demand, including non-domestic and stock readily available and an established core. And three countries achieve three Ds – the Democratic Republic of Congo, Ethiopia and Iraq.
However, any study of the region needs to highlight the growing problem in Africa of HIV/AIDs as well as conflict and war, in particular in Iraq and the Darfur region of Sudan.
Looking ahead, Michael Creamer says: "Political stability and economic growth are the keys to the development of the office markets in these countries. As these new markets develop, increasing opportunities will exist for companies from other sectors, such as banking, law and IT, to establish themselves."