Israeli Withdrawal Good News for Property Market but Other Factors Temper Optimism

Published August 3rd, 2000 - 02:00 GMT

The end of Israel’s occupation of Lebanon removes the most important factors contributing to “the real estate crisis” in the country.  

But this optimism is overshadowed by three main factors, including overpricing of land, and bad Macroeconomic policies by the government, reported the Lebanese Daily Star focusing on a market brief written by a leading consulting firm.  

Following is the full text of the article 


A leading consultant has sounded a positive note about the future of Lebanese real estate after the Israeli withdrawal, although his analysis is hedged with provisos. 

In a “market brief” written for an international real estate firm, Jones Lang Lasalle, Raja Makarem, managing partner of Ramco brokers and consultants, argues that the ending of the Israeli occupation removes the most important factor contributing to “the real estate crisis that has been going since 1996.”  

But Makarem’s hopes of recovery are tempered by his awareness of negative factors, including market oversupply, Solidere’s alleged overpricing in Beirut Central District (BCD), and the government’s macro-economic policy failure.  

Makarem argues that 2000 has supported his belief that Solidere’s land prices are 30 percent too high. Since he first argued this last autumn, the company’s year-end figures have confirmed a decline in land sales from $118 million in 1998 to $37.5 million in 1999.  

Demand is shifting as expected to the BCD, Makarem notes, but even here, despite the arrival of famous names like Versace, Pepsi Cola and Coca Cola, it is “far lower” than the supply.  

The sale prices achieved for floor space, he notes, are well short of the top end $8,000 per square meter that Solidere received for the jewelers shops on the Riad Solh Street side of the still-frozen souks project.  

Despite “bargains ranging between $3,000 and $6,000 per square meter,” and easier terms and conditions, Makarem argues that BCD is proving slow to fill up.  

“Out of 400,000 square meters of renovated buildings, 90 percent of which were refurbished,” he writes, “very little has been occupied and the majority is still vacant.” This conclusion is at odds with real estate firm Healey & Baker, which recently carried out a survey putting the BCD office occupancy rate at 72.5 percent.  

The discrepancy may be partly the result of the complex mix of old and new tenants, and partly the result of delays in occupancy permits discouraging people from moving in.  

A second factor tempering post-withdrawal real estate optimism, says Makarem, is that the market is “still plagued by overcapacity.”  

No reliable figures exist for oversupply, although economist Marwan Iskandar has estimated the total investment in empty properties, which he puts at 18 percent of residential and 20 percent of non-residential stock, at around $6-$7 billion and suggested that it could take seven or eight years for the oversupply to be exhausted.  

Makarem finds a lack of progress in all sub-sectors. With the economy in recession, retail, despite the success of restaurants, has remained “stagnant” with even areas like Verdun, Hamra and Sofil “witnessing a drop from their $10,000, $8,000 and $5,000 achieved respectively” in sale prices per square meter.  

The decline from the peaks of 1995-6 has been far worse with offices, he argues. In Hamra, sale prices have fallen from $2,200 to $1,200, and on the Fouad Chehab ring road from $3,000 to $2,000.  

In residential, sale prices have fallen across the city, with some exceptions, Achrafieh and the coastal areas of west Beirut, where demand has remained strong.  

The third proviso raised by Makarem is the need for improved macro-economic performance. “New parliamentary elections,” he writes, “should lead to the formation of a new government, which will most likely continue the task of dealing with the budget deficit and reviving the economy and providing a better environment for foreign investment.”  

This is surely the most crucial proviso in Makarem’s case. Others who follow the real estate market closely do not share his optimism that a new government will arrest the economy’s decline.  

“Assume a six-month delay after the elections until they all settle down in their new portfolios,” says a leading financial services manager. “Remember the weight and speed of the bureaucracy. Assume the government does nothing; or rather that it makes mistakes. Then, you must assume a macro-economic shakedown.” –  

© 2000 Al Bawaba (

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