Business And Markets

Commercial Real-Estate Sector Slumps in Tehran

Twenty years ago, the vacancy rate of shopping malls stood at 5-7% on a good day; now the rate has increased to 15-20% 
Commercial Real-Estate Sector Slumps in TehranCommercial Real-Estate Sector Slumps in Tehran

The glut of shopping malls across some districts of the Iranian capital city over the past few years has practically ended in deadlock for retailers, such that even food courts and movie theaters fail to spur sale. 
Consequently, rents are at a rock-bottom level and owners of commercial properties have to lower expectations to attract tenants.
According to Hossein Abdoh-Tabrizi, an economic expert of the housing sector, these conditions are indicative of the ridiculously high price-to-rent ratio in shopping malls, stemming from a so-called "earning mirage" and the high rate of commercial real-estate projects over the past years, the Persian-language Donya-e-Eqtesad reported.
“Worse than that is the resistance on the part of developers to consider the price-to-earnings ratio before getting into the business of commercial real-estate development,” he added.  
Abdoh-Tabrizi believes that for the P/E ratio to decline, prices of commercial properties need to decrease, otherwise more tenants will move out as new shopping malls open. 


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