Jordan’s strengthening economy, which in 2006 grew by 6.4%, has spurred commercial activity and fuelled demand for office space in the kingdom. The government is calling on developers to offer more space catering for the needs of multinational corporations.

As prices surge in the capital Amman for land and property, the government is also actively encouraging companies to establish themselves outside the capital by offering reduced tax incentives in designated areas. Aqaba, on the Red Sea, is increasingly being marketed as a hub for tourism and commercial activity, with a financial centre on the way.

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Retail space in shopping centres is also being built to cater for increased consumerism among the rising wealth of Jordan’s middle class and elite.

Jordan’s safe haven

The continued conflict and high security risks in Iraq have led many companies, non-governmental organisations and journalists to relocate their offices to Jordan, increasing the uptake of space, particularly in Amman.

Demand for commercial space has also been driven by the rise of the local private sector, which in 2006 saw the registration of 8633 companies.

Analysts do not seem to have the same concerns with the commercial sector as they do the residential. An investment banker says: “As long as the economy continues to grow, demand for commercial property will always be fuelled.”

Increased trading on the Amman Stock Exchange (ASX) in real estate activity, government initiatives to attract investment as well as a cheap labour force have driven foreign, local and Arab investors to Jordan. In 2006, the volume traded in real estate companies represented more than 30% of the ASX total trading activity.

Speculative trading and rising prices of construction materials have also pushed up local real estate prices.

More office space

Jordan lacks projects that specifically target office space. Most projects are mixed-use developments, such as Saraya Aqaba and the regeneration projects, which have retail space. However, government officials told fDi there were plans to develop this in the very near future.

A good start is the signed joint venture agreement between the Talal Abu Ghazaleh Organization and Aqaba Development Corporation (ADC) to establish Aqaba Business Park. ADC is a state-owned, private sector-run company, aimed at accelerating the development of the Aqaba’s special economic zone by maximizing public-private sector partnerships and investment.

The project will be built on a total area of 430,400 square feet, and consist of two parts. Part one will use 258,240 square feet for 12 office buildings, each at 21,520 square feet, identical in shape and design. The structure for part two will be decided on pending results of research.

Another project is the Jd710m ($1bn) Royal Metropolis being developed by Bahrain’s Gulf Finance House and the Kuwait Investment and Finance Company, the first phase of which are Jordan Gate and Royal Village.

Jordan Gate consists of two high-rise towers connected by a multi-storey podium, located in Amman’s Fifth Circle area. The Gate will cater for executive offices, retail outlets and a hotel. Royal Village will have commercial space, but it is also a mixed-use development with mainly residential space.

Foreign investment

While Iraqis ranked first place for total purchases by foreigners of mainly residential real estate, Kuwaitis purchased the largest area in the first quarter of 2007, but at a significantly lower price than other investors, including Saudis.

In terms of value of transactions, Saudis accounted for 7% of the total, while Kuwaitis ranked 4% and Iraqis took a majority 60%. But Kuwaitis took 10%, Saudis 7% and Iraqis 51% in volume terms.

Arab Banking Corporation Investments, a subsidiary of the Bahrain-based Arab Banking Corporation, says that “while Iraqis have tended to buy residential property in Amman, Kuwaiti investments have leaned towards development projects, consisting of large-scale purchases, further away from the capital where land prices are lower”.

Regulations for foreign investors are favourable. Non-Jordanians may invest in Jordan through ownership, partnership or shareholding in accordance with the laws of the Investment Promotion Committee, whereby the investment shall not be less than Jd50,000, with the exception of participating in public shareholding companies.

Foreign investors are entitled to remit abroad, in a fully convertible currency, foreign capital invested and any returns from projects.

Non-Jordanian companies may open representative and branch offices. Branches are entitled to carry out full business activities, while representative offices may serve as liaisons between head offices abroad and Jordanian customers.

Those holding a majority share in a Jordanian company, and subsidiary, automatically obtain national treatment with respect to ownership of land where the company’s business objectives require ownership.

Competition rises

The government’s most ambitious project is the Jd2bn redevelopment of Aqaba port, for which the ADC says it has a 30-year plan.

A spokesman at ADC says: “We also have plans to relocate the terminal from its current home in the north of Aqaba to the south.”

The remaining land will be used to develop a financial harbour (taking much inspiration from those developed in neighbouring Gulf countries such as Bahrain, Qatar and the United Arab Emirates), commercial districts, tourist attractions and residential properties.

ADC has sectioned the port into separate production units to simplify its planned privatisation. The first step was the launch of an international tender for the management and operation of the container terminal as a freestanding entity to raise its regional competitiveness. This also aimed at ending the port’s congestion crisis.

Kuwait’s National Aviation Services (NAS) won the tender, and is restructuring the terminal to modernise its operations, infrastructure and equipment.

NAS is expected to make a total investment of up to Jd500m over the next 25 years.

Industrial and economic zones

According to ADC, which owns most of Aqaba’s public assets, King Abdullah II mandated a target for Aqaba to attract Jd4.2bn of investment to the area by 2020.

An ADC spokesperson says: “We have long surpassed this figure, and so far have Jd5.6bn worth of commitments.”

Efforts to become an export-driven economy have led to the establishment of several industrial and economic zones.

Qualified industrial zones (QIZs) are areas entitled to duty-free and quota-free access to the US market, and to date there are 13 QIZs.

Jordan’s special economic zone is the Aqaba Special Economic Zone, governed by the Aqaba Special Economic Zone Authority (ASEZA).

The zone aims to improve the economy by attracting investment through incentives such as being a liberalised, low-tax and duty-free area for companies to set up in.

There are also plans to establish a Jd530m special economic zone in Marfaq to serve as a transport, logistics and industrial hub.

Irbid is also developing an economic zone to include IT, health, residential, industry and services projects.

One of the government’s earliest initiatives was the Investment Promotion Law, first implemented in 1995 and amended in 2000. The law says that projects falling within certain sectors are entitled to exemption from income and social services taxes. These include: industry, agriculture, hotels, hospitals, maritime transport and railways, with more planning to come on stream.

Exemptions are based on how developed the area is in which the project falls. These are divided into three geographic development areas, known as zones A, B and C. Developments in built-up areas receive less tax exemptions, while projects in Jordan’s empty quarters receive higher benefits.

Zone C, Jordan’s least developed area, entitles developers to 75% tax exemption.

Hotel and tourism projects set up along the Dead Sea are tagged as zone A and receive only 25%. Exemptions are usually applicable for 10 years, with some flexibility for extensions.

 

IN FOCUS

Shopping frenzy

With the rise of Gulf tourists arriving in Jordan, and a strong Jordanian consumer class, shopping centres are in high demand and have become a focus for some developers.

Indeed, all mixed-use projects under development contain retail and shopping space.

The most recently established centres have been Mecca mall, built by Jordanian real estate conglomerate the Kurdi Group, and Amman City Mall, built by the competing Al Khayr Real Estate Investment Company.

More will follow in the next few years. Bahrain’s Al Tajamouat for Tourism Projects Company is developing a mall in Deir Ghbar with completion scheduled for 2008.

The Kurdi Group has also announced plans to develop a Jd400m mall, expected to be the country’s largest, on the road to Queen Ali International Airport.

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