Saturday, March 14, 2009


There is no bigger fan of Dubai than myself. In the last 7 years Dubai has truly accomplished the amazing. Through Dubai's Grand Vision the Emirate has created some of the most iconic and spectacular architectural marvels in world history. Projects like:

- Palm Jumeirah
- Burj Dubai
- Dubai Marina
- World Islands
- Ski Dubai.... and many others have made the entire world focus on Dubai with awe and envy. No other location on the planet has EVER developed so much so fast! And Dubai gave birth to the greatest real estate developers in history. Names like Nakheel, Emaar, Limitless and DAMAC have become almost legend through their amazing Mega Project developments.

Dubai also gave almost unlimited opportunities for great prosperity and wealth to all those expats who chose to come to Dubai and seek their fortunes. Many, many individuals made great fortunes in real estate and finance by coming to Dubai. In fact, Dubai was a true "Boom Town" and the world took notice

But all of this has now changed. In a BIG way! The world economies have crashed and Dubai, once thought immune, is also crashing. And crashing fast. I am truly amazed at how fast people are leaving Dubai. The change over the past few months has been remarkable. People are literally leaving all they had in Dubai.... cars, homes, etc. and just getting on a plane and leaving. Jobs are being lost at an alarming pace, especially in those areas that were only a short time ago the most attractive-- real estate and finance.

Real estate prices are collapsing and will no doubt continue on a downward spiral. The future of many of the great Mega Projects is also in question and in my opinion:

> It is very doubtful that either Palm Jebel Ali or Palm Deira will ever be fully developed. There is simply no demand for developments on these two gigantic man-made islands.

> Dubailand will never come close to the spectacular original plan for the project. I think certain parts will end up getting finished, but the vast majority of the project will never be built. It has always been questionable whether this project, even if it were ever to get fully built, could attract the projected 40,000 visitors a day hoped for. Especially during the hot summer months.

> Dubai Waterfront, which was originally planned to be a Mega Community twice the size of Hong Kong, will never be fully developed. Nakheel Harbour and Tower, part of Dubai Waterfront, has already been cancelled.

> Development of towers in Business Bay will be drastically cut back. What is the point of building more and more business towers if there are no businesses wanting to occupy them? And Dubai already has a successful business district with DIFC. A second business district is not called for.

> The gigantic new Dubai Mall could turn out to be a huge failure as more and more expats leave Dubai.

> Overall, real estate prices will continue down.... probably ending up 80-90% below their all time highs. And of course many more real estate brokerages and developers will go under.

++ Here is a quote from a recently published article in the Financial Times:

"Not so long ago Dubai was an Eldorado for construction and property companies. Attracted by some of the world’s most ostentatious and expensive projects, contractors from round the world flooded in to help the ambitious Emirate turn itself into a modern metropolis.

"Now, according to economists at National Commercial Bank, Saudi Arabia’s largest lender, $250bn (€199bn, £178bn) of projects have been cancelled or delayed in the seven-state United Arab Emirates – the majority in Dubai."

I could continue, but you get the point. On a more positive note I think that once the world economy begins to improve Dubai will bounce back STRONGLY. Dubai has already positioned itself as the center of finance for the Middle East and a leading world business hub. I believe that Dubai will eventually become a world business powerhouse equal to Hong Kong and London.

I also believe that Dubai will continue to be the world's most innovative developer of real estate projects. Once things begin to improve, Dubai will continue to develop amazing Mega Projects.... just at a slower and more balanced pace than during the boom.

One of the big positives that I see are all the great investment opportunities that the crash is creating. I will be giving you my favorite real estate investments for the Gulf Region in a future post.

In the long run I think the future of Dubai and the entire Gulf is very positive. In fact, I think The Gulf will emerge from the world economic crisis sooner and in better condition than most other parts of the world.

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