Many new and small entrepreneurs are now opting for residential buildings to set up shop after being daunted by the high rents of commercial spaces in the city, said some realtors and small business operators.
Developers said the rents of commercials spaces vary from area to area, but in general the price of per square feet (sft) of commercial space is almost double the price of residential space in Dhaka.
Rentals for showrooms or office space in commercial areas are also much higher than in residential areas.
Not only rent, property owners also demand a sizeable advance, said Md Zakir Hossain, general secretary of the Bangladesh Supermarket Owners' Association.
In some cases, the landlords ask for a year's rent in advance, he said, adding that many supermarkets are not expanding because of that.
“This is one of the main reasons why the superstores take long to break-even,” said Shaheen Khan, chief executive officer of one of the leading superstores chain Meena Bazar.
“Sometimes, we have to give more than two years' advance to rent the space,” he said, adding that the initial investment goes up due to the high rent.
Given the exorbitant rent, many new and young entrepreneurs have turned to residential areas to house their offices or showrooms.
Mounjurul Alam is one of them. Early this year, Alam had to abandon his plan of opening his own clothing store on Dhanmondi road No. 27 after a landlord demanded rent of Tk 250 per sft area along with six months' advance.
“The rent was too high for me to bear and I had no other option but to look for space in residential buildings to start my business,” he said.
Alam said he has to pay Tk 30,000 a month for nearly 700 sft area in the capital's Lalmatia neighbourhood, which is much below the amount he would have to pay had if he rented the property on Dhanmondi-27.
“The authority should create facilities so that new entrants, small and medium businesses can get space at low-cost in commercial areas,” he added.
Realtors linked the high rents to the high land prices and construction costs.
Generally, commercial buildings are constructed on premium locations, empowering the land owners to demand a higher share of the property from developers.
At present, the prices of commercial spaces in Gulshan Avenue are the highest. The rates are also high in Banani, Motijheel, Karwan Bazar and Dhanmondi, according to realtors. Besides, as commercial buildings are usually high rises, developers have to spend more for equipment and other materials, they added.
“The prices of commercial spaces are at least double that of residential spaces in Dhaka,” said Alamgir Shamsul Alamin, president of the Real Estate & Housing Association of Bangladesh.
In some cases, it is thrice that of residential spaces, he said. At this price, it is tough for many existing business people to buy commercial space and do business, said Alamin, also the managing director of Shamsul Alamin Real Estate.
“Only established businesses are able to purchase commercial spaces by paying such high prices. Rentals are also high, which is not feasible for new entrepreneurs.”
The prices of commercial spaces also go up because of auction held by RAJUK to sell plots, according to Alamin.
“RAJUK should act like a services provider and not do business.”
He said the government should frame policy to ensure that a certain percentage of the plots or spaces are kept for commercial purposes and their prices should not be 10-15 percent higher than of residential spaces.
Owing to the high land prices, the sales of commercial spaces have been slow, said Tanvirul Haque Probal, managing director of Building For Future.
This forces many developers to rent out commercial spaces as they have an obligation to repay bank loans, he said.
DCCI President Abul Kasem Khan said decentralisation of Dhaka would be helpful.
“If Purbachal develops, the pressure on main Dhaka will reduce. Decentralisation is the only way through which prices will be adjusted,” he added.