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Sat 18 Jul 2009 04:00 AM

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The only way is up

The latest news, tenders and projects from Kuwait City.

The only way is up
Kuwait is currently experiencing an oversupply of commercial towers and office blocks.
The only way is up
Arraya Tower II is one of the tallest office buildings in Kuwait.

The latest news, tenders and projects from Kuwait City.

Kuwait City can be well remembered as Kuwait's capital even if geography is not your specialist subject. But, what also makes it stick in people's minds is the fact that is the political, cultural and economic centre of the Middle Eastern country.

It is a business hub attracting world-wide investors who wish to seek opportunities in the market.

However, many developers are saying that the demand for commercial towers and office blocks has been drastically decreased and that, currently, there is an oversupply of these buildings.

"Due to the current situation, most companies have either halted their expansion or lowered their space requirement," says Salhia Real Estate property department manager Bader Al Adsani. "Some have closed down parts of their activities so the demand has definitely and significantly reduced."

That hasn't stopped developers from rolling out projects though. The US $240 million (KWD69 million) United Tower, for example, which is located in the Al Sharq area of the city is due to be completed in the third quarter of next year.

"Concrete will soon reach the 23rd floor slab and all relevant electromechanical works and finishes are progressing," says United Real Estate Company managing director and chairman Ahmad Al Sumait.

"We have 37 floors that need to be cast and cladding is yet to be completed."

Another development is the Aknan Tower, which is being managed by Aknan Global and is currently in the tender stage.

"Tenders are being evaluated and firms will be invited to bid [for contracts] in three to four month's time," reports Aknan Global director of real estate and investments Fawaz Al Najadah.

Aknan is a 24-storey commercial tower, which provides office spaces in the city. Construction on the project is set to begin in around three years.

But, Najadah also says that there is "an oversupply" of commercial towers. So why are developers still constructing buildings and what are they gaining from it?

"It is expected that the market will change its direction by the second half of this year. Hence, new construction projects are still feasible as some of these developments will not be operational for another two years," explains Najadah. "Moreover, today the building materials and construction costs will be lower because of the economic crisis."

And, Adsani adds that there still is some demand due to relocation activities.

"This is mainly driven by lowered rental rates or competitive space and better locations," he says. "Parking spaces played a good role as a competitive edge; we have been able to rent out more than 80% of Arraya Office Tower and at high rates."

So, for now, demand is low and supply is high. But, with an expected upturn in the market, Kuwaiti firms remain positive about the growth of its capital."Kuwait's market is emerging and there are many attractive investment opportunities in most of the industry sectors," states Najadah. "Foreign companies are looking to access the market and the Kuwaiti companies are growing exponentially."

He adds that one of the advantages of Kuwait's market is its stability.

"When compared to Dubai or Doha you can obviously note that Kuwait markets are more stable in the economic crisis."

Adsani agrees: "Like every other country in the Gulf, Kuwait has been affected significantly due to the banking crises. However it has been holding up better than [other] major cities."

With long term opportunities in mind, Wafra Mall, another project to be located in the city, has just broken ground.

Wafra Real Estate Company is also planning to build a 40-storey twin tower project, which is currently at tender stage and, once construction gets started, is expected to take 31 months to complete.

Injassat Real Estate has also started work on Injassat Tower, which will spread across 1000m2 of land and will consist of 28 floors. The completion date for the office block is penciled in for the end of this year.

And, at 60-storeys, Arraya Office Tower II is one of Kuwait's tallest office buildings.

The developer, Salhia Real Esate, was the first company to benefit from Kuwait Municipality's regulations, which allow construction up to a height of 100 levels, according to Adsani.

The project, which is located on a 1058m3 plot of land, is in handover stage and the final stages of external works, including landscaping, is currently being completed.

Adsani says that though there is a crisis, Kuwait stands in good stead right now, but the country will have to tread carefully.

"There is good potential for improvement but this will take a slower pace than the last boom," he reports.

"The Government is looking for the best stimulus enhancement for the economy but nothing is definite yet," he said.

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