When it comes to flashy property developments, Dubai left the competition trailing long ago - but the multi-billion dollar Dubai Waterfront project, announced this week by government-held property developer Nakheel, promises to ensure the Gulf state's position as a world leader in audacious construction for decades to come.
At 81m sq metres, the planned mixed-use development will be larger than Manhattan. Consisting of a conglomeration of man-made islands and canals, it will also reconfigure the map of the emirate by adding 850 km of new waterfront - 12 times the length of Dubai's existing coastline.
"We only have 60 km of beach in Dubai, so we want to extend the shore," Dubai Crown Prince Sheikh Mohammed bin Rashid al-Maktoum told Dow Jones recently. "[The Dubai Waterfront] is an unprecedented advancement and a world-class addition to Dubai; one which will create long term growth and investment for the UAE and the wider region."
The project forms the first phase of the Arabian Canal, a 75 km waterway planned to snake around the Jebel Ali area south of the city centre. Situated on the border with Abu Dhabi, along Dubai's last stretch of undeveloped coastline, Dubai Waterfront will be studded with luxury hotels and homes. It is intended to house up to 750,000 people, but the centrepiece will be a new city-centre, Madinat al-Arab, including the world's tallest building. At 810 metres, the Burj Dubai will dwarf its nearest rival, Taipei 101 - which stands at 509 metres. Construction is to start early next year, with completion of the first phase, including the Burj Dubai, after five years.
Speaking at the investor's launch, Nakheel's executive chairman, Sultan Ahmed bin Sulayem, said: "With Dubai Waterfront, Nakheel has raised the bar to a never before seen level. We are proud to help realise Sheikh Mohammed's vision for the Arabian Canal with this first phase. It is destined to become a landmark for Dubai - one which attracts tourists, residents and businesses and creates a destination like nowhere else."
Uniquely for Dubai, this project has been open to outside investors from the start. Nakheel has created the Dubai Waterfront Company to finance the project and will retain the majority share, but 30% will be open to strategic investors and 19% for select private investors. Cost estimates have yet to be published, but local real estate experts speculate that it will be counted in tens of billions of dollars.
"This is the first time investors are getting an opportunity to enter as shareholders in a land development company in Dubai right from the outset," said Bin Sulayem. "They will be realising gains through sales of land, and our projection is that the internal rate of return will be 44% of the total equity." Investors will also get preferential rates for plots on both Dubai Waterfront and other Nakheel ventures.
The move sets a new precedent for the real estate market in the UAE, where historically only local and Gulf Cooperation Council (GCC) nationals have been allowed to buy property. Whilst the market remains closed to foreigners in neighbouring Abu Dhabi, Sheikh Mohammed issued a decree in 2002 allowing foreigners to buy homes and apartments, sparking a residential property boom in Dubai. The decision to allow outside investors a slice of the Dubai Waterfront cake must be intended to generate a similar investment boom in the real estate sector.
At the same time, the Dubai Waterfront and the Arabian Canal project are just the latest, and most ambitious, projects in a frenzy of development that has overtaken Dubai in the past decade.
The emirate aims to attract 40m visitors a year by 2015 as it races to boost tourism and investment before oil revenues dry up. Nakheel itself has already achieved fame for its other extraordinary coastline projects, which include The Palm Jumeirah, a collection of islands in the shape of a palm covered in luxury houses and resorts, which is to be completed next year. There is also The Palm Jebel Ali, and The World, a man-made archipelago of 300 islands in the shape of the world map.
With so many massive development projects under construction, the question remains whether a market for all this new space truly exists. Other mega projects in the UAE include Dubai Marina, Jumeirah Beach Residence, Emirates Hills, Emirates Lakes, Dubai Health City, Dubai International Finance Centre and Business Bay.
There is certainly no lack of ambition for these developments. Hashim al-Dabal, CEO of Dubai Properties, the company behind Business Bay, told Arab News mid-January, "Business Bay is set to become a leading centre for business and shopping, similar to some of the well-known centres like New York's Manhattan or Tokyo's Ginza. Like them, it will act as a base for many leading local, regional and international firms."
According to the Dubai Land Department, the total value of real estate transactions in Dubai last month alone reached more than $607m, as against $367m in the same period in 2004. But this may not be as simple as good old "supply and demand". Some analysts believe that investors, with little else in the region to pour their money into, are fuelling a highly speculative construction and real estate bubble that long ago parted company with reality.
Either way, as long as there are plenty of petro-dollars around to keep the market buoyant, it looks like Dubai's meteoric development is set to continue for a fair while yet.