Monday, October 26, 2009

A monument to the folly of Dubai

A year ago, a world reeling from the financial crisis looked on in amazement as Dubai threw the most expensive launch party on Earth for the opening of the five-star Atlantis Hotel.

Fast forward 12 months and a massive $300bn in planned development projects have been cancelled. The sheikdom, famed for its palm-shaped man-made islands, is floundering under $80bn in debt, and many expatriates have fled leaving a trail of unpaid loans in their wake.

The Burj Dubai - at 818m the tallest building in the world - was scheduled to open in April this year as a symbol of Dubai's achievements.

But although the building now looms over the emirate's chicest development, Downtown Dubai, Burj owners are making quiet murmurs about a possible official opening in December.

This is a far cry from the A-list studded fanfare with which the Atlantis opening was celebrated.

Dubai no longer wants to draw attention to what is now seen as a symbol of excess and all that has gone wrong in the Islamic state, one source said.

Over two decades, Dubai became the land of opportunity, reminiscent of a burgeoning New York, where would-be entrepreneurs arrived from all corners of the globe.

Many became millionaires in a property boom fuelled by cheap debt.

As late as last November, Dubai seemed invincible and recruiters reported a surge in CVs from Western high-flyers keen to find a refuge in the financial storm.

But in a matter of weeks the extent of the fallout from the credit crunch became apparent.

Credit dried up and speculators were left high and dry with vastly overpriced property that they could no longer offload.

Many of the 100,000 British expatriates who had made Dubai their home were made redundant as finance, property and tourism slashed jobs.

As visas are dependant on employment, many had just 30 days to find a new job or leave the country.

Faced with the prospect of debtors' prison, thousands simply dropped off their 4X4s and sports cars at the airport - often with the keys still in the ignition - before heading for home. Parts of Dubai

currently resemble a ghost town with occupancy levels at some luxury developments as low as 50pc.

At night, the most striking views of the skyline reveal a city with many of its buildings only partially lit.

The latest figures from Colliers International, the property consultancy, reveal that residential property prices have slumped by 48pc since last year and are expected to drop a further 20pc as more major projects are completed.

JP Grobbelaar, director of research and advisory at Colliers, said: 'One in every four units is standing empty. Unless there is a dramatic improvement in economic conditions this oversupply will continue for at least the next two to three years.'

Standard & Poor's, the credit ratings agency, said Dubai needs to raise a further $10bn for its economic support fund as it does not have enough capital to prop up its struggling government-controlled companies.

Farouk Soussa, head of Middle East government ratings at S&P, said it will be down to Dubai's oilrich neighbour, Abu Dhabi, the capital of the UAE, to step in once more.

It bailed out Dubai to the tune of $10bn earlier this year.

'The relationship is very close,' Soussa said. 'Abu Dhabi is the main sponsor in the UAE and we expect Abu Dhabi to support the government of Dubai.'

The more conservative capital is unlikely to let Dubai fail, although economists believe that support from Abu Dhabi may come at a price as it threatens the autonomy which allowed Dubai to establish itself as the Middle East's main business centre.

Property is something of a barometer of the financial health of this desert emirate, charting its ups and downs.

'Speculators were treating property like a grocer would a can of beans on the shelf, with no intention of eating it and only wanting to hold on to it for a day or two,' Grobbelaar said. 'But they got their fingers burnt.'

Today some sanity has returned to the market. Two thirds of property transactions in the past three months have been made without a mortgage, indicating serious investors are convinced the market will recover in the long term.

But whether this putative revival will return Dubai to its glittering pomp is anyone's guess.

Wednesday, October 14, 2009

Tallest tower set to open in Dubai

Burj Dubai, the world's tallest tower, will open on December 2, the United Arab Emirates' National Day, says the developer.

Emaar Properties started building the US$1.1 billion Burj Dubai five years ago.

The tower, centrepiece of the US$20 billion Downtown Dubai project, overtook Taipei 101 as the tallest building at 818m in February.

"We are shooting for National Day," said chairman Mohammed Alabbar. Emaar, the UAE's biggest developer, announced the completion of the exterior cladding on October 1.

About 12,000 people are working on the tower to meet the planned opening date. The final height of the building hasn't been announced.

Dubai, the second-biggest sheikhdom in the UAE, has gone from being the best performer among the 46 markets monitored in the Knight Frank global house-price index to the worst.

The slump ended a construction boom that resulted in thousands of houses and apartments being built just as demand started to evaporate.

Alabbar said the Burj "was sold almost 3 years ago, the day we launched it".

Tuesday, October 13, 2009

When skyscrapers signal a downturn

It's surprisingly hard to decide on the tallest building in the world. Architects are much like Hollywood stars in their tendency to try to add a couple of sneaky inches. The people at the Council on Tall Buildings and Urban Habitat, who adjudicate on these matters, have had to ban all kinds of Cuban-heel equivalents, from enormous radio masts to metal "guy-ropes" holding up towers that would otherwise collapse in strong winds.

However, their job has got easier with the construction of the Burj Dubai. When it's finished in December, it will take the "world's tallest building" crown simply by dint of being really big. Standing over 800 metres high, it will be at least 290 metres taller than its nearest competitor, the Taipei 101 building in Taiwan. Its success, though, may be tarnished by the fact that it arrives in a very different world to that in which it was conceived. The property market in Dubai has plummeted and we're still stuck in the economic winter.

This won't have surprised analyst Andrew Lawrence. In 1999 the research director at investment bank Dresdner Kleinwort Wasserstein invented something called the "Skyscraper index", arguing that the construction of super-tall buildings is often a sign that an economic downturn is on the way. The best example is the late 1920s, which saw an unprecedented skyscraper boom prior to the Great Depression. The Empire State Building, which was finished in 1929, didn't achieve full occupancy for 40 years. Other examples include the Sears Tower in Chicago, finished in time for the Oil Crisis of 1974, and the Petronas Towers in Malaysia, which appeared after the Malaysian stockmarket went down the plughole in 1997. By the time Canary Wharf was finished in 1991, the London commercial property market was in recession; and the slower pace of building in Britain means our next record-breaking white elephant, the Shard Of Glass in London's Southwark, won't be completed until 2012.

Skyscrapers, then, are the physical embodiment of "irrational exuberance" in the markets. The rule is that if there's enough money sloshing around to pay for one, then don't be surprised if, by the time the purple ribbon's cut, the scissors have to be on hire purchase.

Monday, October 12, 2009

Dubai skyscraper symbol of S. Korea's global heights

Standing in the shadow of the Burj Dubai Kye Ho Kim of Samsung Construction rattles off the list of records the building will break.

Standing about a half mile high, it will be the world's tallest building, with the most floors (164) and the world's highest and fastest building. "This building is going to break so many records," said Kim, whose company is building the $4 billion tower, scheduled to open later this year. "This is kind of a project like the first exploration of the moon. Nobody can challenge it."

It may not rank with manned missions to the moon, but right now there is nothing else like the Burj Dubai on Earth. As the project is metaphoric for the strength of Samsung Construction, the company itself symbolizes the growth of South Korea onto the world stage. A country once devastated by war and still divided by north and south has rebuilt itself into a modern capitalist democracy with companies with a global reach such as Samsung

Samsung has cornered the market in giant building construction, building the Petronas Towers in Kuala Lumpur and Taipei 101 in Taiwan -- both previous world-record holders.

"Think about the Americans when they constructed the Empire State Building in 1931," Kim said. "So have we ... in a very short period of time we are now the leading company in the world."

Some of Korea's more impressive building projects are happening at home. In the midst of the recession, construction of Songdo -- a 1,500-acre new free trade zone built on reclaimed land two hours out of Seoul -- continues apace, with a projected cost of $35 billion. Developers hope it will be the eventual home of 75,000 people.

It's considered one of the world's largest private real estate development ventures in history, a joint project with South Korea's Posco and Gale International, a U.S. real estate developer. "Under construction today is about $10 billion" of the project, said Chris Sausser, executive vice president of Gale International. "The project we're building has been able to attract multinational companies, investors as well as residents."

Postwar South Korea was based on a "growth at any cost" model, but the South Korean government has pledged 2 percent of its GDP for the next five years dedicated to green development. The country, already the world's most wired, plans to develop next-generation Internet connections that use less computing power. Indoor lighting initiatives are replacing traditional bulbs with lower energy LED lights.

"Green growth is not a plan B, it is plan A," said Kim Sang Hyup, executive director of the Green Growth Committee. "We are going to contribute to the global community by action, not talk."

Wednesday, October 7, 2009

Dubai tower to open in stages

The developer building the world's tallest skyscraper says it is committed to opening the Burj Dubai by the end of the year, though a staggered rollout means only part of the silvery tower will be ready at first.

Ahmad al-Matrooshi, managing director of Emaar Properties' UAE operations, said yesterday that the opening date was being kept secret to build excitement.

But he insisted that major work was nearly complete and the tower would meet Emaar's latest deadline to inaugurate the building by the end of December.

"The building is ready. It's a matter of a few items," he said.

Burj Dubai, Arabic for "Dubai Tower", stands more than 800m tall. Emaar finished covering the building's facade just last week.

It has yet to confirm the tower's final height.

Al-Matrooshi declined to say how much of the building would be ready to go on opening day. He said the tower would be opened in phases to ensure smooth operation.

"See, you cannot just open a building like this," he said. "There are a lot of operational issues that should be ready. We cannot compromise the quality of the building."

Meanwhile, work on another highly anticipated skyscraper in the struggling Arab boomtown - a gleaming luxury hotel by Donald Trump meant as a centrepiece for Dubai's original palm-shaped island - looks likely to remain on hold.

Donald Trump jnr, executive vice-president of the Trump Organisation, said he would like to see work on the Trump International Hotel & Tower get under way in two years, but acknowledged "it's going to take some time" for the project to be restarted.

"When it makes sense, we want to go forward with it," Trump said. "I wouldn't say it's going to happen any time soon."

The Trump hotel is being built by Dubai state-owned developer Nakheel. It stopped work on the glass-clad structure and numerous other projects, including some of its signature man-made islands, over the past year as property prices plummeted and cash dried up.

The executives spoke during the first day of Dubai's Cityscape property expo, traditionally one of the highlights of the sheikdom's business calendar.

Thin crowds and toned-down exhibits - at least by Dubai's over-the-top standards - left the event far quieter than in years past, reflecting a crippling slowdown in Dubai's once white-hot property market.

Home prices have plunged by half from their peak less than a year earlier, according to a widely watched index of Dubai property prices released in August.

Hundreds of multimillion-dollar projects have been put on hold as speculators who made easy cash flipping properties disappeared and builders struggled to secure financing for projects - even those already well under way.

Exhibitors at this year's expo were taking an uncharacteristically cautious approach to the show.

Gone were the celebrity cameos and eye-popping project launches of years past, replaced instead by assurances from struggling developers that they could deliver on their promises.

"Committed to delivery" was the slogan touted by one builder at this year's show.

Organisers say exhibitors are taking up nearly a third less space than they did last year, and expect attendance to drop by 20 per cent.