Dubai’s Peculiar Commercial Real Estate Problem

Finding office space in Dubai should be a snap: The office vacancy rate stands at more than 40 percent. Yet after searching fruitlessly for more than two years, Standard Chartered, the U.K.’s third-largest bank, decided to put up its own tower. When construction is complete in 2012, it will occupy 8 of the building’s 13 floors.

Standard Chartered is confronting a peculiarity of Dubai’s troubled real estate market. During the business hub’s property boom from 2002 to mid-2008, developers sold sections of yet-to-be-built apartment and office buildings to investors. The result is that in many buildings each floor has a different owner, making it difficult for large tenants to find enough contiguous space and modify it to suit their needs. By the end of last year, 22 percent of Dubai’s 61 million square feet of commercial space was held by multiple owners under what are known as strata titles.