Despite the ongoing repercussions from the 2008-09 economic downturn, as a whole Dubai’s real estate sector has seen increased activity in recent years. Since the recovery began in late 2010 and early 2011, many of the emirate’s largest projects, a substantial number of which were put on hold in the years following the downturn, have been restarted. Indeed, developers have sought to commence work again at a handful of the emirate’s so-called mega-projects, a category that broadly includes all developments expected to cost more than $1bn or have a major impact on the market and the surrounding community.
While work on mega-projects such as the Burj Khalifa and Dubai Mall continued during the downturn, others were put on hold as developers tightened their belts. By late 2012, several of these projects had yet to restart. The UAE has nonetheless remained the largest market for mega-projects in the region. Even during the crisis, work continued on a handful of major developments, including the Burj Khalifa – the tallest building in the world – which opened in early January 2010, in the midst of the fallout from the crisis.
As of late 2012, the UAE was in fact home to 106 mega-projects in total, according to Construction Week Online (CWO), a Dubai-based industry-specific publication. This includes projects that were launched prior to 2008-09 and are currently on hold; projects that are now under construction; and projects that are in the initial conceptual and design stages. The figure for Dubai is the highest in the GCC region, according to CWO, with Saudi Arabia listed at 73, Qatar with 45, Kuwait with 25, Oman with 13 and Bahrain with 10.
COMPLETED PROJECTS: In the four years since the downturn hit, a handful of mega-projects have been completed. The Burj Khalifa, which is widely reported to have cost around $1.5bn to build, officially opened its doors in early 2010. The 828-metre, 200-storey tower was developed by the government-owned Emaar Properties, the largest real estate development firm in the Middle East, as part of the company’s Downtown Dubai project, which, upon completion, will have cost an estimated $20bn and cover an area of around 2 km.
The Burj Khalifa includes 944 apartments in total, in addition to a substantial amount of office space. Since the downturn prices for apartments in the tower have fluctuated. In early 2008, when the building was still under construction, residential purchase prices reached Dh10,000 ($2710) per sq ft. Since then, however, prices have fallen substantially, reaching a low of Dh2650 ($720) during the crisis. In 2011 and 2012 prices have posted solid growth. As of late October 2012, for example, prices ranged from Dh2900 ($789) per sq ft on the low end to Dh4600 ($1251) per sq ft for luxury high-end flats, according to estimates from the Dubai Land Department (DLD). Provided Dubai’s real estate sector continues on its current trajectory, these figures are expected to continue to rise in the coming years.
Completing work on the tallest building in the world in the midst of a major economic crisis was a challenge. Indeed, the ability of the Dubai government and a number of government-controlled firms, including Emaar, to manage and service large amounts of debt became exposed when the downturn hit in 2008-09. Some reports estimate debts rose up to a total of nearly $100bn post-2008. In February 2009 the UAE’s central bank, which is located in Abu Dhabi City, bought $10bn-worth of five-year bonds from Dubai, allowing the emirate to stave off bankruptcy. Further loans and funding from Abu Dhabi followed through 2009 and 2010. Upon completion of the tower, Sheikh Mohammed bin Rashid Al Maktoum, UAE vice-president, and prime minister and ruler of Dubai, chose the name Burj Khalifa, in honour of Sheikh Khalifa bin Zayed Al Nahyan, the president of the UAE and ruler of Abu Dhabi.
FOLLOWING SUIT: In addition to the Burj Khalifa, Emaar completed work on another mega-project, Dubai Mall, in November 2008, just after the downturn began. With a 112-sq-ha footprint, it is the largest mall in the world by total area. Despite the crisis, Dubai Mall has posted solid returns since it opened its doors, buoyed by strong demand for high-quality retail space in the emirate. In 2011 the mall attracted 54m visitors, up 10% from the previous year, according to Emaar. This figure makes Dubai Mall the most-visited shopping and leisure destination in the world for the year.
The mall has played a key role in Emaar’s development portfolio since the downturn. In 2011 the firm’s retail division, which oversees Dubai Mall and a handful of other shopping centres in the UAE and elsewhere in the region, brought in Dh2.14bn ($582.1m) in revenues, equal to some 26% of the firm’s total revenues.
ON HOLD: The UAE is still home to a large number of suspended projects. According to a recent report published by Citigroup, the value of cancelled and delayed construction projects in the country as a whole was around $410bn in April 2012, up 2% from the beginning of the year. The vast majority of these projects were cancelled or put on hold immediately following the downturn, in 2008 and 2009.
For example, The World, a collection of 300 man-made islands in the shape of the world around 4 km offshore, was put on hold in 2009 and remains so today. The project is headed by Nakheel Properties, a state-owned firm that was hit especially hard during the downturn, when it was forced to write down around $21bn worth of real estate projects. Since then, however, Nakheel has appointed new leadership and carried out a major debt-restructuring deal, which has resulted in a return to profits in recent years. In spite of The World remaining on hold, according to the developer around 70% of the islands have been sold, and in January 2012 the Royal Island Beach Club officially opened its doors for business on the island of Lebanon.
Nakheel is also responsible for a number of other major projects in various stages of completion. The Palm Jumeirah, one of three palm-shaped reclaimed-land developments off the coast of Dubai, was launched in 2001, with reclamation work and the initial phase of villas delivered in 2006. Since then a number of additional projects have been completed on the island, including Atlantis, a large-scale hotel resort, which was opened in late September 2008, just weeks after the financial crisis took hold in the US. Reclamation work on the Palm Jebel Ali, a similar project located just a little further down the coast from Palm Jumeirah, was only partially completed when the crisis hit, and the project has been on hold ever since. Similarly, Palm Deira, Nakheel’s third palm-shaped development, was in the early planning stages when the downturn hit, and has yet to take shape. The Universe, a series of man-made islands in the shape of the solar system, to be built near The World, was also in the initial planning stages when the crisis hit, and was promptly put on hold, though according to Nakheel it will be built at a future date.
Other mega-projects that have also been paused include Nakheel’s Dubai Waterfront, another massive reclaimed land project located near Palm Jebel Ali; Dubai World Central’s (DWC’s) numerous city projects; Tatweer’s Dubailand; Dubai Maritime City; and the Dubai Trade Centre Jebel Ali, among others. The Dubailand project, which was announced in 2003, was initially slated to cost around $64bn and cover an area of around 278 sq km, though it has been significantly reduced in scale since the crisis began. Similarly, many of the DWC’s eight city projects, which include DWC Residential City, DWC Logistics City, DWC Commercial City, DWC Aviation City and DWC Golf City, among others, have been put on hold, though the government-owned firm says it plans to move forward with them in the future.
CURRENTLY UNDER WAY: In 2011 and 2012 work on a number of previously stalled mega-projects have recommenced and a handful of new mega-projects have been announced. In May 2012 Dubai Municipality relaunched work on Dubai Safari, a 400-ha wild animal park, which was originally announced in 2007 and put on hold in 2008. The Dh150m ($40.65m) project will include a zoo, botanical gardens and a golf course, in addition to entertainment and recreational areas. Dubai Safari will replace the existing Dubai Zoo, which has been managed by Dubai Municipality since the 1970s, making it the oldest zoo in the Gulf. Other projects that have been recently revived include a 3-km dhow wharfage at the Deira Corniche and the completion of the Business Bay Canal, including linking the canal to the sea. Other projects are also due to restart under the Tayseer and Tanmia initiatives (see Construction chapter).
A number of new mega-projects have also been announced in recent years. In March 2012 the government announced plans to build a new opera house and modern art museum near the Burj Khalifa, in an effort to strengthen Dubai’s reputation as a cultural centre in the region. These projects, which are due to be carried out by Emaar, are expected to aid Dubai in competing with Abu Dhabi, Qatar and Oman, all of which have invested in cultural developments in recent years.
In October 2012, Link Global, a local firm, announced plans to build a replica of India’s Taj Mahal in Dubai. The Taj Arabia is meant to be four times larger than the original building and will include a luxury hotel in addition to various commercial buildings. At an estimated cost of roughly $1bn, the project will be completed by 2014.
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