By SPIEGEL Staff
They were certainly heady years. In cities like Shanghai, Moscow and Dubai, the urban landscape was re-invented at breakneck speed. Revolving construction cranes dominated skylines and economic growth was measured in the number of stories a building had. It was a high-stakes gamble involving money, steel and glass.
In the new urbanism, nothing could happen quickly enough, nor could anything be praised loudly enough. Numerous entities had their fingers in the pie of each major deal, from banks to investors to brokers. There were no limits to the business savvy and the flows of capital involved.
Anything seemed possible. Every new building was supposed to a superlative, so that it could serve as visible proof of enormous economic power. Yearnings for pomp and prestige were transformed into architecture. Some designs were reminiscent of perfume bottles, others of rockets.
But now the enormous real estate bubble of the sheikhs, oligarchs and neo-capitalist financiers has burst. The international economic crisis has caught up with the nouveau-riche high flyers in the Middle East and Asia who, until recently, had gloatingly watched the collapse of the West, where one skyscraper project after the next has been abandoned. But now the brakes are also being put on one construction project after another in Dubai, Saudi Arabia and Russia.
One of the centers of the new era was Dubai, a city on the Persian Gulf with no history, no special mineral resources, but with a seemingly unlimited future. Dubai was a promising real estate mirage which gradually became reality. Its mantra of "build it and they will come" worked for years. The masters of Dubai even created new luxury building sites by developing artificial islands in the shape of palm trees. Two groups of islands are already complete, but a planned third group is now likely to be put on hold.
An event held in Dubai one Friday in December showed just how different things are looking in the Gulf city these days. The invitation revealed, as usual, only the most important details. Aiman Holding planned to unveil a project it called "The Twelfth," consisting of a high-rise residential building on one of the palm islands. The event was to be held at the five-star Raffles Hotel. Guests would apparently only be allowed entry if they presented a copy of their passport and checkbook.
Ordinarily, it would not have taken any more than that to fill a ballroom in Dubai with real estate investors. They came by the dozens whenever a new real estate developer appeared on the scene, and by the hundreds when an established vendor announced that it was accepting bids for a luxury residence, an office tower or a shopping mall. There were times when speculators in suits and ties would camp out in the lobby to be the first to place their orders.
That might have still been the case in October, but not today. At 11:30 a.m., an hour and a half after the beginning of the event, 10 real estate agents are sitting alone at their tables. The model of the residential high-rise looks abandoned next to the opulent, untouched buffet. There was no deluge of customers. No one was interested in the penthouse pool, the four-story garage or the private beach with a view of the Dubai skyline.
Developers are quietly removing one project after another from the market. Donald Trump's $600 million (438 million) Trump International Hotel and Tower on the Palm Jumeirah island has been "postponed." A 1,000-meter tower being planned by the partly state-owned real estate development company Nakheel is "under review." And the new Jumeirah Gardens neighborhood, with a planned total investment of $100 billion (73 billion), has also been "postponed."
The tallest building in the world is still under construction in this ambitious emirate. The Burj Dubai ("Dubai Tower") is a mixed-use tower which will be more than 800 meters (2,624 feet) tall when completed. But by the time of the dedication ceremony planned for next fall, will its roughly 200 stories still be needed? Won't the market in Dubai, famous for its insane profit margins, have imploded long before then?
In some high-rise apartment buildings in Dubai, only a few apartments are occupied so far -- a fact that becomes particularly noticeable at night, when the lights are on in only a few windows. "Wait a while before buying real estate in Dubai," says a broker at his real estate booth in the "Mall of the Emirates," his voice lowered. Another bad sign is that The Brasserie restaurant in the Arabian Park Hotel began serving free lunches to Dubai's new unemployed in mid-December. Most of those who come are real estate brokers -- yesterday's resourceful gold-diggers dining in soup kitchens today.
Similarly glum news is coming from the real estate markets in Qatar, Bahrain, Kuwait and even Saudi Arabia, the heavyweight on the Gulf. The King Abdullah Economic City, a new 170-square-kilometer (65-square-mile) commercial, residential and industrial city being built in Saudi Arabia 100 kilometers (62 miles) north of the city of Jeddah, is having trouble finding international investors, the development company Emaar conceded.
It is hard to believe that the region was experiencing a boom of Babylonian proportions until very recently. The value of projects under construction or in planning in the United Arab Emirates and Saudi Arabia alone amounts to well over $1 trillion (730 million).
Until recently, the Saudis envisioned an unbelievably tall structure for the port city of Jeddah: a giant of a building stretching more than 1 kilometer (3,280 feet) into the sky. But now falling oil prices have taken their toll on the real estate industry, and it is now questionable whether the developer, Kingdom Holding, will ever build the giant tower.
These are only the first signs of what could lie ahead: a long-term economic slump for high-flying construction projects in countries where officials recklessly relied on revenues from the sale of mineral resources, borrowing against their oil and natural gas reserves. As prices have come down, plans have been cancelled or put on hold.
Those who can are trying to put on a brave face. In Abu Dhabi, the young Stuttgart-based Lava architecture firm has been commissioned to build the Michael Schumacher World Champion Tower, a dynamically shaped structure which, at 250 meters (820 feet), is almost modest in its scale.
The groundbreaking ceremony was scheduled for next month. But now, says Alexander Rieck, one of the directors at Lava, it has been postponed until March, April or possibly even later. He insists, however, that this is no cause for concern. "A few weeks ago, they were still saying that we should not delay the start of construction, because prices were going up from one month to the next," he says. "But now prices are falling, and any delay simply reduces the cost of the project."
But is "delayed" just a euphemism for cancelled? No architect, investor or emirate is likely to willingly release news of cancelled skyscraper projects or abandoned construction sites. Nevertheless, Abu Dhabi, with its oil reserves, is still in a stronger position than Dubai.
Stay informed with our free news services:
|All news from SPIEGEL International||Twitter | RSS|
|All news from Business section||RSS|
© SPIEGEL ONLINE 2009
All Rights Reserved
Reproduction only allowed with the permission of SPIEGELnet GmbH