Under construction houses

Recommendation for Construction Market in Iran

Posted on Posted in Business Guidelines

Real estate market in recent years has changed drastically. Nowadays there are so many shopping centers under construction, also however there’s a real need to new hotels, but at least 25 new hotels will be added to the market in next five years. Just the market of International standard offices is somewhat virgin.

Nevertheless, Tehran has a huge capacity of need to renovation and no market is in area of saturation.

Monthly retail Rent prices for a Grade A shopping center now is about USD 200 per sqm. This rate for a Grade A office is about USD 60 per sqm and average one night stay in a 40 sqm room in 4 Star hotel (like Eskan Alvand) is about USD 150, considering occupancy rate about 75 percent, monthly revenue of one sqm hotel is about 112.5.

Based on above calculations, Retail is the most profitable segment, but Hotel and Office rates are close. Comparing profitability of Office versus Hotel depends on the Rent price of office and accommodation price that developer could claim in the market.

The hidden and also important issue is the synergy between these three segments. A good office with foreigner companies can help hotel segment to be profitable. And a good and branded hotel can make more footfall for retail segment and motivate brands to attend in shopping center in order to be close to office and hotel visitors.

Our suggestion is to follow mixed office/hotel/retail preferably with partnership of municipality in order not to pay license fees and other charges but with minimum shares to keep the management of the complex in our hands.

Management is the loosing item in Iranian shopping centers as well as hotels and offices, so signing a contract with good international operators is the cheating code for being successful in current Iranian market.

FAR Law Firm

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