Canada's Brookfield expects Dubai office demand to shrug off oil slump

By Matt Smith
DUBAI, Jan 20 (Reuters) - A Brookfield Property Partners
BPY.N joint venture began work on a $1 billion office tower in
Dubai on Wednesday as the Canadian company bets the emirate's
commercial property sector will be unaffected by the sustained
slump in oil prices.
Brent crude LCOc1 has fallen by about 75 percent from a
2014 high, ravaging the state finances of the Gulf's major
producers, spurring governments to reduce subsidies and leading
economists to cut growth forecasts.
Oil contributes very little to Dubai's economy, which relies
much more on real estate, retail and transport, among other
sectors. But as the Gulf's hub it is not immune to the effects
of crude's tumble.
Brookfield seem undeterred, however, forming a 50-50 joint
venture with state-owned Investment Corporation of Dubai (ICD)
to build a 53-storey tower in the Dubai International Finance
Centre (DIFC) that is slated to be completed in late 2018.
"By the time this project is completed, the world will be a
different place," said Ric Clark, chairman of Brookfield
Property Partners, which has more than $65 billion in assets.
"A lot of international businesses are covering the Middle
East, India and Africa from Dubai; it's a quality of life
thing," he told reporters, adding that vacancy rates in the DIFC
were in single-digit percentages.
About 19 percent of office space in Dubai's central business
district is empty, industry consultant JLL said this month,
predicting that the vacancy rate would increase.
Prime office rents rose 4 percent last year, JLL estimates,
though rival consultant CBRE said rents were flat.
Commercial property has fared better than residential, which
suffered sales price declines in the double-digit percentages
and a 43 percent drop in the aggregate sales value in the 11
months to November, CBRE estimates.
Brookfield's Clark said he was in talks with potential
tenants to take several hundred thousand square feet of office
space in the consortium's tower, though no deals had been
signed.
Construction financing will fund about 65 percent of the
building, the cost of which is undisclosed, with the partners
jointly contributing the remainder.
"It will likely be a consortium of banks. We're probably two
to three months away from wrapping that up," Clark said.
The main contractor is a partnership between Brookfield
Multiplex, a unit of Brookfield's parent company, and Korea's
Ssangyong Engineering and Construction, part-owned by ICD.
ICD's assets under management were worth $190 billion in
November. by David Goodman)