Kuwaiti offices half empty after hub bid runs aground

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Kuwait's economy has long been underpinned by its oil production.

Kuwait's economy has long been underpinned by its oil production.

Almost half the office space in Kuwait's financial centre lies empty after plans to become a regional business hub rivalling Dubai were wrecked by the financial crisis and the difficulties of doing business in the Gulf state.

Kuwait's economy has long been underpinned by its oil production but growth in other sectors has only been moderate and observers such as the International Monetary Fund have stressed the need for Kuwait to diversify its economy.

Developers went on a building spree after the overthrow of Iraq's Saddam Hussein in 2003, believing that businesses would flock to Kuwait once the region stabilized.

But the financial crisis and an unfavourable regulatory and infrastructure environment kept many companies away, with recent political tensions putting off both local and foreign investors.

Unfinished tower blocks now dot the skyline of the capital Kuwait City, where even prime locations struggle to fetch more than half their rental value from before the crisis, real estate officials said.

Occupancy in Kuwait City is 55 percent, said Tawfiq al-Jarah, the head of the union of Kuwaiti real estate companies.

"There is a glut of supply of office space," he said. "Occupancy is the engine and dynamo of the property market."

"We sense that the government is taking this issue seriously this time," Jarah said, adding that the government had indicated it would rent spaces instead of building new offices.

The average monthly rental rate is KWD6.9 (US$24.55) per square metre, compared to KWD13 to KWD14 before the crisis, he added. In the country as a whole there are 817,000 sqm of office space and only 59 percent of that is occupied.

According to research by Kuwait Finance House, one of the Gulf's biggest Islamic lenders, commercial property prices have also halved in since 2008.

The downturn has hit real estate companies hard, with several closing down or having their shares halted from trading on the stock exchange.

Upheaval in the major OPEC oil producer has deterred foreign investors. Kuwait consistently ranks lower than other Gulf Arab states in global business and competitiveness rankings.

Political turmoil in Kuwait, which borders fellow oil producers Saudi Arabia and Iraq and sits across the Gulf from Iran, has also held up a 30 billion dinar development plan.

Last year the Kuwait Investment Authority, the country's sovereign wealth fund, said it was setting up a real estate portfolio with 1 billion dinars of capital to invest locally. But market observers say they have yet to feel the effect.

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Posted by: Andy

Kuwaiti people are very much stuck to their own thinking. They sort of remind me of the Thai and Korean people in Asia. I had a friend visit me from Kuwait just a few weeks ago in Hong Kong and I took him out to several local restaurants to try some Asian local Asian dishes but sure enough neither him or his wife could eat or like the local food. They were to used to to their own food in Kuwait to accept any other food. In the end they would end up going to a local restaurant opened up by an Indian selling Arabic food in which in my opinion thought was horrible. This couple comes from a well off family as well who has travelled the world.

When we met I had asked him quite a few questions about Kuwait & to sum it up they are very patriotic about their state and people. Bottom line is there are few countries in Asia and in the middle-east that will accept non-locals into their society like in Europe or the US. The local laws in both Asia & the middle-east are set up to protect locals.

Posted by: Edward Waner

Jay, I must agree with Mary. I was in Kuwait in 2009. Mary's comment about xenophobia is correct. The investment laws are archaic as are the visa and residency laws. I did find many Kuwaitis as lifelong friends, but I also found many Kuwaitis in management to be clueless and having gotten jobs due to how well they were related to government officials. I unfortunately found many young Kuwaitis with fresh college degrees and zero experience thinking they were qualified for senior management and business positions. The thing that troubled me the most, is the most prejudice I saw in Kuwaitis is towards Americans. Kuwait had many attitude problems that regardless of wealth will prevent them from advancement.
I have worked many other places in the Middle East, and I don't find these attitudes prevalent. I have had friends and colleagues work and enjoy their time in Kuwait, but none of them disagree with the statements I've made above.

Posted by: mary

Kuwait needs a wake up call and realize that without the implementation of the 30BN development plan, restructuring business laws for foreign companies and finally refining the business visa laws was key executives, such as self-sponsorship for family members, will leave Kuwait with empty office spaces and lack of interest in this oil-rich GCC nation. Presentation is key, and Kuwait is not a very welcoming country for any business to set up shop nor for any key executive to have a stable family life such as in Dubai. In other words, Kuwait needs to get their house in order before they even consider welcoming the 'big guns' coming in, so at this point they will have to house them in Dubai and fly them home for the week-ends to jumpstart the economy. Poor planning and lack of vision for a nation that needs foreign expertise badly in a country with an unstable government and a zenophobic view of expats.

Posted by: RAH

You have some valid points, Mary but others not so valid.
"Poor planning and lack of vision for a nation that needs foreign expertise badly in a country with an unstable government and a zenophobic view of expats."

Poor planning and lack of vision: A series of development plans (currently, the 2010/2011-2013/14 in effect) are made to help achieve/reach the Kuwait Vision 2035.

Unstable government: incorrect. It is an unstable political scene we are going through for the past 2 decades. The government is pretty much stable but parliament are the ones causing havoc. So its the politic scene in general rather than government alone.

Zenophobic view of expats: I would LOVE to see your evidence on this one, or is it purely based on your opinion on how you were treated while standing at a starbucks queue somewhere in Kuwait on your last visit?

Overall, the government has the vision and the drive to get Kuwait moving however, it is parliament that insists on stopping everything.

Posted by: jay

Mary while agree with most of your comments Expats do and have stable family lives we all dont need alcohol etc to have that. Family life is what you make it, all to often all i see is expats staying with expats and not making an effort to mix and thats the same for all nationalities
I have met some fantastic people made true friendships that survise when they move away
Kuwait has challenges but were all here to work and make our families lives better so instead of complaining life is half empty its half full in my view
negitivity breeds negitivity

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