Monthly Blog- June 2024

Charles Whitmee

I was looking forward to my first trip to the Gulf and Kuwait did not disappoint. Until the discovery of oil in the 1930’s, Kuwait was best known for the harvesting and trade of pearls. Indeed, the pearl remains a national symbol and is featured in   much of the country’s art and architecture. The most memorable example of this being the extraordinarily opulent Assima Pearls chandelier, located in the Al Assima Mall. As I stood gazing up at the sparkling behemoth, I was told two facts about it. First, that it is the largest chandelier in the world, and second, that it weighs 16 tonnes. The transition from intrigue to terror was abrupt.

I was on an assignment, looking at the office market in Kuwait City. The city itself is by far and away the dominant office market in Kuwait, with around 5.1 million square metres of total office space- accounting for over 77% of all the stock in the country. By comparison, Dubai has around 9.2 million square metres, with Abu Dhabi at 3.9 million square metres. Just as with Dubai and Abu Dhabi, the office market in Kuwait City is highly reliant on the public sector. As of Q1 2024, around 47% of office space in the city is leased to government entities and the market is, therefore, subject to some concentration risk in this regard.

Asking rents have begun to stabilise after falling during and immediately after the pandemic. The market has been spared the continuous downward trend seen in other markets, helped by a concerted effort from the government. For example, in August 2021, the Public Authority for Manpower issued a statement enforcing all public entities to end their “work-from-home” policies, mandating that all public sector workers return to the office. A number of local property experts and landlords with whom we consulted also referenced a cultural element in Kuwait which pushes against working from home, although this is harder to quantify.

While these factors helped somewhat to mitigate the effects of the pandemic on the office market, rents remain around 5-10% lower today than in 2019. In the private sector, there has been more of a shift towards remote and hybrid working and this has caused many large tenants to downsize. This trend has been accompanied by a “flight to quality,” leading to an increase in demand for the highest quality (Grade A+) spaces. Based on our enquiries, I would estimate that vacancy rates for Grade A and Grade A+ offices would between 5-10%. In some cases, such as the Grade A+ KIPCO Tower, there was no office space available to let at all, despite it having over 50,000 square metres of GLA.