Dubai development extravaganza
Despite a rocky few months for Dubai's stock market, the emirate has upped its game, bouncing back in the limelight with its announcement of - yet again - the world's largest shopping mall.
The Mall of the World will occupy 8 million square feet, approximately one-and-a-half times the size of Dubai Mall. Dubai Holding, the investment vehicle of the emirate's ruler, will need AED25 billion to build the entertainment district that will include the mall.
While the plans have caused some analysts to warn that Dubai risks overbuilding again (as it did a decade ago), chief executive Ahmad Bin Bayat believes there is a demand for such projects. "The way things are growing, I think we are barely coping with the demand...tourism is growing in Dubai." The whole project will be built over 10 years and Bayat explained that the funds will be raised gradually over that period.
However, this isn't the only mega project Dubai has in store. Last month, Los Angeles-based company Reef Worlds (best known for designing sets for movies like Pirates of the Caribbean) announced it was developing the world's largest sustainable underwater tourism site in Dubai. It will transform the artificial island complex - The World - into an underwater tourism attraction modeled after the Lost City of Atlantis.
Moreover, a proposal to build a new smart city in the UAE is also in works, which will see Italian company Stile Italiano Real Estate Industry collaborate with local partners to construct the $25b-30b project. Titled Renaissance City, it will be built over 300 hectares and will have residences, offices, a school, shopping mall, medical centre, library and the UAE's first opera house among other amenities.
Emaar has also launched many new residential projects this year. According to ratings agency Moody's, while Emaar's hospitality and retail assets provide a cushion against market volatility, more developers are launching similar projects and thereby running a risk of overcapacity. "There is a risk that the company embarks on a significant multi-year capital spending plan in the current market up-cycle to not only launch new developments but also expand its hospitality and retail assets at a time when competitors are increasingly becoming active in these sectors," said Rehan Akbar, Moody's analyst and author of a new report.
Market Insight is aimed at examining the emirate's dynamic market and forecasting industry trends. Undoubtedly, amidst all the new launches, there has been a growing cause for concern that Dubai is heading towards another unsustainable property bubble, something the International Monetary Fund has warned against repeatedly. However, sustained fiscal consolidation and brightening growth prospects have been strengthening Dubai's resilience to external shocks as the emirate gears up for an economic upswing, the IMF said in a recent report. The robust growth for Dubai in the coming years will be driven by big real estate projects and spending ahead of the Expo 2020. Ending on a positive note, the IMF seems upbeat about Dubai's ability to finance its debts. As for where the market is heading right now, only time will tell so be sure to follow up on all the latest in our next issue.