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Sunday, January 08, 2006

We Ain't Seen Nothin' Yet

The scale of development in Dubai constantly amazes me. It is one of the things that turned me into a property buyer and now a property enthusiast. I'm not in the business of real estate at all. I've just decided to purchase a small flat that I can call home. Like everyone I was somewhat skeptical in the beginning. But when I started to see these projects actually materializing in the desert, my skepticism faded. One of the many amazing things in this whole Dubai real estate boom is that, according to some, the grandiose projects announced within the past few years are only the beginning.

One such prophet of greater things to come is the Middle East Economic Digest's Edmund O'Sullivan, who marvels,

What has been built is only a fraction of what is yet to come... If I am right, then it remains true that Dubai is witnessing the greatest project story ever told. (MEED, 16-Dec-05)

Mr. O'Sullivan's enthusiasm seems unbridled. It was his reaction to what "speaker after speaker unveiled" at the 6-7 December Major New Product Opportunities Conference in Dubai , sponsored by MEED. I will quote more of his comments further down which elaborate on the scope of development underway.

That sort of enthusiasm is contagious. That afterall is what bubbles are often made of--as many would describe Dubai's current building boom. But as a resident in this country who has seen these events unfold over the past 5 years, I would argue that there are fundamentals in this market that underlie the high emotions. For starters, as anyone on the outside will readily point out, there is oil money--not so much that originates within Dubai as that which is available for investment from neighboring Abu Dhabi emirate and surrounding Gulf states. This, however, is only a small part of the equation. Tourism is another factor that brings in not only money but also creates international awareness of what is going on. This along with trade are two industries which are already well-established pillars upon which Dubai is able to support its building boom.

Furthermore, above and beyond these factors are quite simply the vision, will and authority of the leadership in Dubai emirate to carry out its daring plans and schemes. Few places have such a combination of factors as these. It isn't simply a case of rampant speculation that is driving the boom, in fact, speculative activity in the real estate market has already begun to wane.

Now, the whole point of this piece is to second the viewpoint that MEED's O'Sullivan deftly argues in his own article. It matters little what I think, but the words of the editor of a leading Middle East business publication do count for something. I close with Mr. Sullivan's way of saying, "You ain't seen nothin' yet!"

Emaar Properties is pressing ahead with its $20 billion Downtown project, including the world's tallest tower and largest mall. City of Arabia, just a small part of Dubailand which aims to attract up to 100 million visitors a year, will have a mall, a monorail and computerized, life-like dinosaurs. Dubai Sports City's four world-class stadiums should be good enough to hold Olympic events. Its homes will accommodate up to 70,000 permanent residents.

Emaar's Downtown with Burj Dubai (world's tallest building)

Business Bay, being developed by Dubai Properties, entails 500 towers and a canal up to 130 meters wide that will run south from the head of Dubai Creek and eventually to cut through to the Gulf. When complete, it will effectively turn Bur Dubai into an island.

Dubai Property's Business Bay

If this is not enough, then the new Jebel Ali International Airport will have six runways, enough space for 120 million passengers a year and a targeted, long-term population of 750,000 people...

Jebel Ali International Airport & Jebel Ali City

And then there is Nakheel, the biggest developer of them all. Palm Jumeirah, which is due to open in phases from the end of 2006, is designed to have a permanent population of 100.000 people. Palm Deira, which involves history's largest ever dredging contract, is to have at least 250,000. Dubai Waterfront and Palm Jebel Ali outstrip them all, with a final projected combined population of more than 1 million.

Nakheel's Dubai Waterfront with Jebel Ali Palm


And what connection has all of this with the Dubai Marina. Well, the Dubai Marina, envisioned by Emaar, was the very first of the mega projects, conceived of in the mid-1990's with construction of the Marina canal starting in 1998. Expected to consist of up to 200 towers to house more than 100,000 people, it is presently the largest construction site in the UAE. Even at such a scale the Dubai Marina has almost become passe--especially having been upstaged by competitor Nakheel's massive Dubai Waterfront project. Looking beyond the Dubai Marina, enthusiasts chart out the ever more grandiose projects yet to break ground.

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  • Hi BD

    Did you see todays' KT?

    The Palm projects are now seriously delayed:
    Palm Jumeirah: 2008
    Palm Jebel Ali: 2009
    Palm Deira: 2015

    Read it here

    By Blogger nzm, at 08 January, 2006 16:43  

  • Thanks NZM. Interesting article but of course badly written by Khaleej Times. It's hard to make heads or tails about what they're really saying. What does it mean that 10% downpayment is being waived? No idea what they're trying to say!

    Anyway, interesting news but I'll hold my breath until I hear it from a better source, like Gulf News. Nakheel has its issues. They had really better learn to be more transparent and let people know what's going on all through the process.

    People can live with the fact that projects this novel will take some time, but to promise one thing and then years later suddenly come out with another is bad business.

    But I am holding my breath...

    By Blogger BD, at 08 January, 2006 21:10  

  • Similar story in Gulf News - but just on the Palm Deira.

    Palm Deira will not be called off

    Looks like both articles have quoted a media release from Nakheel, because it has the same confusing wording.

    I believe that the "10% being waived" is with regard to some buyers who received a "special gift" from Sheikh Mohammed - they were not required to make the 10% deposit as downpayment on the properties. This "gift" is now transferable to property in other Nakheel projects.

    Have also "heard" that the Nakheel projects are heavily relying on the Jumeirah Palm villas to be a success in order to maintain the credibility of Nakheel. The latest issue is with the awful smell in the Palm from the stagnant water - it's not circulating as it should through the waterways and is starting to stink.

    Hopefully they'll be able to rectify the issue, but I can imagine that by now. the costs of building the Palm heavily outweigh the revenues that they expect to generate from the property sales.

    By Blogger nzm, at 10 January, 2006 02:12  

  • Thanks again NZM. I was checking the GN site yesterday but found nothing. The link you gave is great as this (well-written) article clarifies a lot. Reading the KT article leaves the impression that Nakheel is totally inept. Reading GN, which includes more direct references, it sounds like Nakheel is dealing with problems as one would expect a large, established company to do.

    They report that investers know the project isn't for short-term investment, like so many other Dubai projects, Palm Deira will take 10 years and they give a rough breakdown of what will be done when... It all sounds reasonable to me.

    It also makes perfect sense that they will make an effort to get P-Jumeirah perfect realizing correctly that everything else hangs on how it turns out. So if it takes a couple years more, so be it--even if as you suggest it will cost more than what they can recover. They should be able to make it up on future projects, speaking of which...

    They can, however, still benefit from the gift by transferring their investment to another project to soon be announced by Nakheel, the company said.

    Gulf News and Nakheel are hinting at something.

    By Blogger BD, at 10 January, 2006 08:55  

  • The latest from Nakheel:
    A New City is Rising From the Sea

    Here they insist everything is on (or ahead of!) schedule. I take this as typical corporation rhetoric to defend a "product," on the other hand I have yet to see reports in other publications like that in the KT, which seems to create unwarranted alarm.

    If I were an investor I wouldn't feel my investment was in jeopardy. If I were considering buying a property on any of the palms I would take me time and consider other options.

    By Blogger BD, at 13 January, 2006 10:16  

  • KT were merely splicing together previous reports in international media like bloomberg. the gulf news will never dare criticise anything, so you will have to depend on the kt for real news, even if it doesnt read well

    By Anonymous Anonymous, at 19 January, 2006 10:30  

  • ^^^ Interesting perspective--so perhaps we shouldn't be so judgemental about the KT. But how can they get off being anymore outspoken that GN. Wouldn't they be afraid of stepping on toes too?

    By Blogger BD, at 19 January, 2006 10:37  

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