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Thu 14 Oct 2010 12:43 PM

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Burj Khalifa luxury homes' rents cut on lack of tenants

Rents for luxury apartments in world's tallest tower slashed by as much as 40% - Better Homes

Burj Khalifa luxury homes' rents cut on lack of tenants
BURJ BUILDER: Emaar sold 90 percent of the homes in the tower before the January opening.
Burj Khalifa luxury homes' rents cut on lack of tenants
(Getty Images)
Burj Khalifa luxury homes' rents cut on lack of tenants
Burj Khalifa luxury homes' rents cut on lack of tenants
HIGH HOPES: The Armani Hotel Dubai, developed in collaboration with Emaar Properties, will be located in the base of the Burj Khalifa in Downtown Dubai.

Rents for luxury apartments in Dubai’s Burj Khalifa, the world’s tallest tower, have been slashed by as much as 40 percent after the owners failed to find tenants, according to a broker that’s marketing the homes.

The cost of renting a studio with floor-to-ceiling windows, marble and wooden floors has dropped to 6,666 dirhams ($1,815) a month, while a one-bedroom apartment is available for AED10,000, Better Homes said. Two-bedroom homes are going for 15,833 dirhams.

Nine months after Burj Khalifa was inaugurated with a water-and-firework display, about 825 of the tower’s 900 apartments remain unoccupied, said Laura Adams, a residential sales and leasing adviser at Dubai-based Better Homes. The building is within walking distance of The Address, which offers serviced apartments at similar rates.

“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 questions. The Address is operated by Emaar Properties PJSC, the company that built Burj Khalifa.

Owners of apartments at Burj Khalifa also pay an annual service charge of 53 dirhams a square foot for the maintenance of communal areas such as gyms and swimming pools, Adams said. Her company is helping to find tenants for about 20 percent of the apartments.

Emaar sold 90 percent of the homes in the tower before the January opening. The building also has 144 Armani-branded residences, 37 floors of office space and 160 hotel rooms. It houses Armani’s first hotel and an observation deck on the 124th floor.

During the five years of construction, Dubai went from the world’s best performing property market to the worst. The collapse of global credit markets led to price declines of more than 50 percent and the cancellation of nearly half of the real- estate projects planned in the emirate.

Apartment prices in the tower have fallen to less than half. They 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, according to Landmark Advisory, a Dubai-based property adviser.

“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.” (Bloomberg)

 

Simon 8 years ago

53dhs/sqft community charge. I wonder how many can afford that bill when they can't even attract tennents.

A 2,000sqft, 2bed apartment would cost the owner 106,000dhs/yr in community charges alone. What is left from the rent??

He would have bought the unit at its cheapest for 2,500dhs/sqft = 5,000,000dhs price tag. But many didn't buy at the cheapest price, they bought at 3,000dhs/sqft++

Lets say to attract a tennent, the owner rents it for 180,000dhs/yr Maximum. Thats a 74,000dhs return on his investment.

On the above VERY reasonable example, the owner is getting a 1.5% net return on his investment. What if he bought it on Finance? Well, thats obvious, he's making a serious Loss.

If a building remainds empty for too long and tennents don't pay their community charges...we all know what happens. Everything deteriates...service, maintenance and materials.

Values drop further and further...

Slobs 8 years ago

"They are now selling for no more than 3,300 dirhams a square foot" . .thts like EUR 2000 per square meter. .i mean thts cheappppp. .wow. .tht much is m2 in EUR 3,000 gdp per capita eastern europe. .and UAE is like 20x larger economy compared to those, not even to mention most prestigious buildin and the square in the world. .cud u please advice on agancy tht sells these apts. .this must hav been a mistake! . .otherwise i m gettin me one tommorow!! :)

Samer Helmy 8 years ago

It was clear they wouldn't move at market prices as they were competing with the Address next door.
By what new age philosophy are we to create new terminology in the real estate industry where we call prices at which rental is NOT happening: "market prices"? Have Dubai community warped so far off the rest of existence that they still think Hong Kong and London square foot rates can be "willed" into existence?

Might as well shut our eyes and ears, maybe the bank calls and foreclosure notices will go away just like the big bad boogieman in the closet.

pedro 8 years ago

why do the media always quote these so-called real estate experts on what to expect? None of them saw the crash coming just 2 years ago, despite the huge oversupply which was there for all to see.

John 8 years ago

These prices are about 20 per cent away from realistic, but greedy landlords are going to need to suffer just a bit more to let go. This tower in sadly of another era, when there was no tomorrow in Dubai. Now it is just a symbol, a tragic and empty one at that. The finances of the project have never been revealed, but one suspects most of the "buyers" were paper ones. It was the spin masters who went overboard.

gordon robertson 8 years ago

that is about euro 6300 per sqm
wish it was 2000

Omar 8 years ago

I agree Pedro. None of them saw it because none of almost them were qualified in their field. Most of the so called real estate experts are people who were fired from their previous jobs overseas which, in most cases, had little to do with real estate. Two years ago even junior economists / analysts were warning of the crash but no one wanted to listen, including the local press. It simply wasn't convenient...

ANIL MATHEW 8 years ago

Seriously, if they rent out a 1 bed at AED 4,000 per month including maintenance charges, you might see some migration into the Burj.

It's really not a question of money anymore. It's a question of absolute value.

Saeid 8 years ago

@Simon,
I started doing the math and then saw your post. Thank you, it sums up everything I wanted to say.

The future is very bleak for Burj Kal. It's a shame too, it's such a beautiful building and a symbol of what Dubai wanted to be.

Jango 8 years ago

’That was supposed to happened after these crisis.’