Dubai dries up
The downturn in world property markets has spread to Dubai where building projects have been put on hold and investors are facing an uncertain future, writes MARY FITZGERALDin Dubai
WHEN advertising executives were dreaming up the latest campaign for Nakheel, a state-owned developer responsible for much of Dubai’s architectural swagger, they probably congratulated themselves on the pithy simplicity of their chosen tagline. A series of roadside banners featuring the Nakheel projects that have become some of Dubai’s most iconic, including a cluster of artificial islands constructed to look like a map of the world, ends with a simple sign that reads: “What next?”
Last year, the tagline could have been interpreted as summing up the thrusting, ambitious spirit of this tiny emirate where life, or at least that depicted in countless advertising hoardings, seems to be lived in superlatives. Today, as Dubai finds itself buffeted by the crosswinds of the global financial crisis, the question posed by Nakheel’s advertisement unwittingly captures the uneasy mood that has taken hold in recent months.
These are difficult days for what became known during six years of frenzied boom as Dubai Inc. Thousands of jobs have been lost in the emirate’s financial and property sectors – last month one Dubai hotel was offering a free meal to the newly redundant – as tremors from the credit crunch pass through a city that has been criticised for its hubristic extravagance and perceived folly as much as it has drawn admiration for its bold vision. Almost $600 billion (€469 billion) worth of building projects in the United Arab Emirates (UAE) confederation, which includes Dubai and its oil-rich sibling Abu Dhabi, have been put on hold.
Take Nakheel itself. Last month the company announced it was postponing the construction of a 1km-tall tower in Dubai which it had previously boasted would be the world’s highest. Plans for a lavish $600 million (€469 million) skyscraper hotel, a joint venture with Donald Trump, have also been suspended. At the end of last year, Nakheel laid off 500 staff and said it would scale back work on the archipelago of man-made islands for which it is best known.
One of the projects on hold is the island of Ireland which, as part of The World development, will feature Irish-themed homes and a hotel resort when finished. The future of the Ireland project was thrown into doubt after Larionovo, an Irish property investment company leading the consortium of investors that bought the island in 2007, went into liquidation in November. Daragh Sharkey, of O’Dolan International, another consortium member, confirmed last month that work had been suspended until economic conditions improved. “We still believe in the project and if one place in the world gets better before anywhere else, it’s going to be Dubai,” he said.
Another government-owned firm has reined in plans for a $95 billion (€74 billion) “new city” development which, in addition to office and residential towers, promises a green space half the size of New York’s Central Park. The sprawling Dubailand theme park on the outskirts of the city, which developers say will be twice as big as Disney World when completed, is also under review.
IT ALL SEEMED so different last November when celebrations to mark the opening of the gargantuan pink-hued Atlantis resort hotel, built on a palm-shaped island, included a feast of 4,000 lobsters and a fireworks display reportedly visible from space. Soon after came news of the latest planned addition to Dubai’s litany of excess – a hotel beach with artificially cooled sand and wind machines to provide a gentle breeze. The last hurrah, some observers muttered, before the storms raging elsewhere arrived at Dubai’s door.
Umpteen cranes – an estimated 20 per cent of the world’s total – still clutter the city’s skyline, bearing testament to Dubai’s philosophy of “build it and they will come” but closer inspection reveals that many have been left idle. A local research firm expects residential and commercial property prices to plummet by up to 50 per cent this year and rents to fall by more than a fifth. “Go into any real estate office in Dubai these days and you won’t find a soul,” sighs a European expat who has lived in the city for more than a decade.
One casualty of Dubai’s shrivelling property market is Darragh McGreevy from Newry. Darragh (33) moved to the Emirates in 2004 and chairs the Dubai Celts GAA club. He worked as a commercial manager in the construction sector until he was laid off last month. “Even when things were getting bad in the US and Europe, it seemed rosy here but that changed fairly quickly,” he says. “I know at least four Irish people here who have lost jobs recently. A lot of people are talking about April as the recovery date but I think that is wishful thinking. They didn’t think the credit crunch was going to hit here in the first place, so who knows when it will end.”
Others, like Jason Smith, manager of the Irish Village bar, take a more positive view. “We’re still as busy as ever, actually business is better than it was this time last year,” says Smith (29) from Dundalk. “Every time I call home it’s all doom and gloom, but it’s not as bad as that here yet.”
Colm McLoughlin, the Irish managing director of Dubai Duty Free, also remains sanguine. “So far, Dubai has not been affected to the same extent as elsewhere and I’m fully confident it will weather the storm,” he insists. “That said, a lot of people do not have the same sense of optimism that I have, and I only have it because of the work I’m in. I think the overriding feeling here is one of caution.”
McLoughlin notes that airport traffic in January was higher than the same period last year, as were duty-free sales. He recruited 1,800 people in 2008 to prepare for the opening of a new terminal at Dubai airport. But he admits there is concern that deepening recessions elsewhere and the collapse of sterling against the dollar-pegged Emirati dirham could bite hard on Dubai’s tourism industry, one of the cornerstones of its economy.
Trevor Lloyd-Jones, managing editor of Business Intelligence Middle East, cites industry sources as saying occupancy rates were down by more than a quarter in some Dubai hotels last month. “Tourists are a very important element of spending in Dubai, they comprise up to 25 per cent of some of the malls,” he says, noting that even the month-long Dubai Shopping Festival, an annual crowd-puller which runs until tomorrow, has failed to lift dwindling sales despite huge discounts. “Some major retailers have said their sales are currently down 20 per cent and they are starting to make staff cutbacks. Some traders in the gold souk say their business is down by 50 per cent . . . We are expecting to see closures this year.”
VIJAY, A TAXI driver from Kerala who emigrated to Dubai some 20 years ago, complains that business is slow. “This time of year is usually busy for us but there are very few tourists around at the moment,” he says. Vijay claims that thousands of the Asian, African and Arab manual and service workers that propped up Dubai’s economy on paltry salaries are now returning home because work is hard to come by. “I may even go back to India if things don’t improve,” he shrugs.
But the dream of making it in Dubai still endures for some. “I moved out here for a change six months ago and I think I got here at the right time,” says a twenty-something architect from Dublin. “A lot of friends in architecture and design back home have been laid off and everybody is trying to come out here now. I would say that while there are still some jobs available, the streets are not really paved with gold anymore.”
Carlow-born John Kelly, who employs 140 people at his Dubai-based steel engineering firm, was struck by the number of Irish people he met at a recent Enterprise Ireland event who had relocated to the Emirates in the last year to set up businesses. He notes recent predictions that, despite the slowdown elsewhere, Dubai’s economy will grow by up to 3 per cent this year. “That’s good going. It’s still a competitive place to do business. Dubai bounces back very quickly.”
Another Irish professional who came to Dubai straight out of college 18 months ago says she knows she made the right decision when she reads bleak news reports telling of further job losses in her hometown of Limerick. “I feel very lucky here compared with what is happening at home. This image of Dubai as a sinking ship that everyone is trying to flee is a huge exaggeration.”
Dubai’s authorities appear increasingly jittery over how to square the gap between perception and reality when it comes to dealing with the fallout from the global financial crisis. Last week Dubai’s police chief tried to quash reports in several local and international media outlets that claimed up to 3,000 cars had been abandoned at Dubai International Airport in recent months, most with keys left in the ignition and some with maxed-out credit cards in the glove box or notes of apology pinned to the windscreen. Only 11 cars had been abandoned since last year, he insisted.
Newly-drafted media laws threaten to fine anyone who knowingly publishes information that damages the UAE’s reputation or harms its economy, though an Emirati minister dismissed suggestions that this tightening of legislation was in response to the slew of negative headlines about the impact of the global downturn on the confederation.
DUBAI’S RULER, Sheikh Mohammed bin Rashid Al Maktoum, has formed an advisory council to chart the emirate through the current crisis. The result, say analysts, may be a reshaping of the high-debt Dubai Inc model into a more sustainable one based less on loans and speculation.
“We hope we will look back on this time as one when there was an adjustment that had to happen, and it put us back on a more sustainable track,” says John Merrigan, a long-time Irish resident of Dubai who works in the construction sector. “During my time here we’ve had two Gulf wars, the Asian financial crisis and other economic crises around the world but Dubai has maintained a steady course. The question is, do you accept the glass is half-full or half-empty? We’re hoping for the best, but planning for the worst.”
Pat Fallon, who manages a plant hire business in the city, agrees that rumours of the demise of the Dubai dream have been greatly exaggerated but admits that optimism has been in short supply in recent months. “You could say that the dream will have to be put on a different level or footing for the future,” he says. “I don’t think the sort of opportunities we’ve seen in Dubai over the last 10 years will exist here again, or anywhere else for that matter.”