Brent Day

Dubai: Gauging the Impact

With all due respect to your own experience, I am also speaking from first-hand experience as I have been resident in Dubai for the last 12 years and still am. Most of those years were spent working with an international A & E consultant and more recently project management. I can tell you that while there may very well have been ongoing design work on so-called mega-projects in Dubai until recently or even up until now in a few cases, major projects started getting cancelled or suspended more than a year ago and now there are very, very few projects still moving forward in Dubai. Yes SOM was involved, I worked with them at the Burj Dubai, I also worked with I.M. Pei at Limitless, KPF on another project, etc., etc. I am not aware of any active project that any of these firms is still involved with in Dubai. By way of illustration, my own firm is a mere 20% of the size it was one year ago when we had several significant jobs on the go in Dubai and now we have only one rather small project still ongoing in Dubai. The fact is momentum has long since moved from Dubai (which as I say now virtually dead) to other places like Abu Dhabi, Qatar, and KSA mainly. So on the point of whether Dubai's bubble has popped, I'm afraid that nobody can convince me otherwise, it is rather obvious, I and my colleagues live it each day. Further I would say if any U.S.-based firms are still relying on fee revenue from Dubai to carry it through the recession as you assert, my advice would be to implement robust risk management policies and procedures, i.e. pull the pin and cut loses when the fees stop getting paid. Otherwise they may never see the money or if lucky will be forced to accept 50 cents or less on the dollar at some point in the future to get paid (which in fact my own firm did earlier this year to try and collect from a major Dubai-based developer thats currently making global headlines - and we still didn't get much of our money).

On the issue of the wider Middle East region as you allude to, I do not doubt that work in the Middle East and Far East is sustaining the big U.S. firms at present, as these regions are sustaining many international firms. That Dubai is dead is not in doubt (to me) but other places are in fact very active. I am somewhat more optimistic that the wider region will hold up and remain relatively strong despite the current situation in Dubai. One must realize that Abu Dhabi, for example, has 100 years of proven oil reserves in the ground and the biggest sovereign wealth fund in the world. In short they have cold hard cash and lots of it and no default (worst case scenario) in Dubai is going to change that. Abu Dhabi does not need to borrow money from anybody else and they have a very ambitious 2030 plan in place to be one of the leading cities in the world by that time. One of the many differences between Abu Dhabi and Dubai is that Abu Dhabi is resisting an "orgy" of construction and development similar to what Dubai experienced in the 2002-2008 boom, and is instead proceeding in a slow, measured and planned way. One common criticism that most international firms working there have is that it moves too slowly and everything is subject to extensive regulatory and authorities' scrutiny before approvals can be obtained. Qatar has gas and KSA also has lots of oil as we all know. Both countries have very aggressive development plans and are executing them. Iraq is picking up, my firm now has 3 projects there and there is widespread consensus (in this region at least) it will be an increasingly important market going forward. Libya is proceeding with several major developments after decades of nothing and the cash registers there are filled to the brim with oil revenue.

In summary, yes Dubai is dead for at least 5 years but the wider region is not and I personally think its poised to grow strongly and be one of the key areas for global real estate and construction over the next decade. One must realize that the major oil & gas exporters of this region have been the beneficiary of the one of the greatest transfers of wealth in history for the last several years - i.e. money from the west for oil at historically high prices. So yup I know the bubble has popped in Dubai, it hasn't popped elsewhere in the region and I do not believe it will as there are very ambitious development plans in place, the intent to execute those plans and the cold hard cash and hard assets in the ground to make it happen.


On Nov 29 02:01 AM chris coonan wrote:

> I beg to differ with you. I was a principal in a 500 person Architecture
> firm a year ago (now that firm is 300 people), and I know that all
> of the major firms in Chicago are presently engaged in Dubai projects
> (Smith Gill, SOM, Goetch, Gensler, etc. etc. etc) The China and Dubai
> work is the only thing keeping the major players afloat right now.
> If there is a run for the exit in the Middle East it will play havoc
> for US firms. Asia is about half of the international work, and emerging
> locations like Vietnam are having issues right now, so it makes the
> Middle East more important. I think that there is a lag effect in
> play right now.
>
> You might believe the bubble popped already, but I contend that it
> may be just the tip of the iceberg.

Dubai: The Counter Trade

No, Dubai WAS a place where significant numbers of American A & E firms (as well as UK, Canadian, Australian, practically any other industrialized country for that matter) where working. But that was at least a year ago now. The bubble has popped already. The author is right, this is old news and it is mainly European banks and contractors who will get hit hardest if in fact DP World/ Nakheel actually default on a portion of their debt. There has never been a presence from North American - based firms as significant as European firms.


On Nov 27 01:58 PM chris coonan wrote:

> It may be small potato's in the big picture, but Dubai is significant
> as it represents one of the engines that is suppose to power the
> developing world. Dubai is a place that is hiring a lot of Americans
> right now, Architects, Engineers, etc. It will be a big loss for
> America and Europe in weeks to come.

Dubai: Gauging the Impact

The bubble is well popped in Dubai already and those firms that are still involved with ongoing Dubai-based projects are relatively few now. Most have either downsized to the bone or closed up operations here altogeather. However it is true that many more U.S. firms are actively involved in such nearby GCC markets as Abu Dhabi, Qatar, Saudi Arabia, etc which are relatively healthier and active compared to Dubai. It is likely true that some U.S. firms (mainly architectural and engineering) will have difficulty collecting fees from work already done and delivered in Dubai (join the club like everybody else) but going forward there will be few still involved here. Of all the western countries, UK-based firms are the hardest hit by the bursting of the Dubai bubble, they are owed hundreds of millions of dollars in outstanding fees/contracts and this is an ongoing issue that is regularly discussed between the most senior levels of the UK and Dubai governments.


On Nov 27 01:15 PM chris coonan wrote:

> It is a US issue. ALL of the major architecture and engineering firms
> in the US are involved in Dubai right now. Those are the only firms
> which have not laid off half of their staffs right now. If the bubble
> pops in Dubai, it will be a major blow for US Architecture firms
> at the minimum.

How Will the U.S. Recover from the Debt Crisis?

The sooner Obama and the current dems are gone, the better. The U.S. needs to take a dose of very tough medicine now and for several years in the immediate future; fiscal discipline - cut spending and get the deficit under some sort of control with the aim of one day being able to start paying down the debt, stabilize then cut taxes to allow free enterprise and capitalism to work and lead the U.S. economy into the future rather than gov

Is Dubai a Better Play on Real Estate Recovery Than the U.K. or U.S.?

Whether or not there is still a net inflow of expats (of the sort that will have the means to play the Dubai property market) is very debatable. Lots of highly-paid white collar job loss has been reported in local rags. Much more than that in reality based on anecdotal eveidence. And there will be more to come. Much more as the real estate and construction industries continue to fall in 2009. I believe that ultimately rental demand should fall due to declining population and so should the rents demanded if this behaves anything like a normal market.


On Dec 20 08:05 PM daniel.ocallaghan wrote:

> Is anyone here considering the fact that rental prices in Dubai are
> sky high and only increasing as the number of expats continues to
> pour in.
> The buy to let market couldnt be better, I'd imagine this will spur
> demand for purchases as well?