Shifting sands: A Dubai update

Shifting sands: A Dubai update

9th February 2009

Developments in Dubai stalling, amongst economic gloom

DUBAI, United Arab Emirates – It’s a 35-minute taxi ride from the city center to Tiger Woods Dubai, perhaps the most ambitious golf project yet in this sprawling desert oasis.

Leaving the city, we pass structures in various stages of completion. As the boom stretches Dubai’s fringes, the once-modest settlement on Dubai Creek expands into a metropolis. Eventually, the building sites yield to open desert. On the turn toward the city of Al Ain, the desert sweeps away majestically at the horizon and a dirt road weaves into the sand. Trucks slowly navigate the dusty route.

This is the spot where Woods’ architectural reputation will be established.

Woods’ first design project is well under way, with two holes already grassed, 10 shaped and the other six roughly cast out.

Yet Dubai, the last of three consecutive Persian Gulf stops on the European Tour and home to the season-ending “Race to Dubai,” is a picture in contrasts. More than one year into a worldwide economic slowdown, many projects here have sputtered recently. While Tiger Woods Dubai bucks the financial headwinds and takes shape, doubt permeates the rest of the city’s building boom.

The cabbie who drove me to the Woods project is an expatriate from Pakistan, one of many who have come to the “City of Gold” on the promise of better living. He said the past four months have been dire.

“From 2002 to 2008, much boom in Dubai – lots of work, lots of construction, big projects,” he said. “From September last year until now, very, very bad. Lots of work stopped, lots of projects canceled or not started.”

That workingman’s view from the streets would seem to belie what meets the eye, given all the construction in the city.

At Woods’ Al Ruwaya course, a 7,829-yard layout near Dubai Sports City, there was no shortage of endeavor on the Saturday of the Dubai Desert Classic.

Woods’ design – he also has projects near Asheville, N.C., and in Mexico – is scheduled for completion in September. Project director Abdulla Al Gurg, when asked for a status report, was hesitant. “We are committed to completing Tiger Woods’ vision here in Dubai,” Al Gurg said on two separate occasions, avoiding a target date.

Al Gurg says 35 percent of the 197 properties have been sold and the remaining lots were expected to sell in the next 24 months. These aren’t typical golf villas or condominiums. It’s a mixture of palaces and mansions. A 90-suite hotel with 14 bungalows also is on-site. Membership at Al Ruwaya is restricted to homeowners, and hotel guests also will be able to play.

“We don’t want outside people playing the course,” Al Gurg said. “This is a very exclusive club.”

Since oil in the UAE was discovered in mass quantities in the mid-20th century, the region has surged into a leading global economic power. Dubai, the jewel in the seven-emirate crown ringing the Persian Gulf, has proved to be a magnet for international business and development. But the Middle East’s boomtown is finding that it is not immune from the global economic meltdown. Things aren’t as bad as in some markets, but investors – even in Dubai – have become more guarded with a shrinking pool of capital.

“There’s a realization that the good times have ended,” said Medardo Cadiz, a U.S.-educated Filipino and chief executive of Cadiz International, an architectural company in Dubai. “A lot of people made a lot of money very quickly here, but that’s not going to happen in the next few years. People are going to have to lower their sights.

“The problem is that until now, everything was high end, but the market is crying out for properties that are much more affordable. People just don’t have the money right now. Those that do are not willing to buy now. They will wait until the prices come down.”

The ruling Al Maktoum family keeps a tight lid on bad news, but even the normally cautious UAE newspapers can’t ignore the impact of the current financial crisis.

Gulf News carried a story Jan. 27 in which Mohamed Ali Alabbar, chairman of Emaar Properties, the largest property developer in the UAE, rebuffed notions that property values could fall as much as 60 percent, calling such talk “illogical.” However, he did concede to decreasing property prices, perhaps by 20 percent if “owners are in dire need for cash.”

The decline in the fourth quarter of 2008 alone was 23 percent, according to a report by HSBC. Now, in a move all too familiar to the West, layoffs are infecting companies that do business in Dubai. A who’s who of architectural and property firms with operations in the UAE – Emaar, Burt Hill, WS Atkins, Nakheel, Damac and Omniyat among them – have laid off hundreds in recent months. Clearly, the business of building Dubai has slowed greatly.

How this might affect the European Tour’s much-vaunted Race to Dubai remains to be seen. Leisurecorp, the Dubai government-backed group, pledged $100 million to the European Tour over the next five years. Much of the money is predicated on selling homes through Jumeirah Golf Estates.

Talk in the emirate about the Race to Dubai remains upbeat. The Dubai World Golf Championship, the final event on the Euro Tour calendar, will be played Nov. 19-22 on the Greg Norman-designed Earth Course. The event is a key to the marketing strategy behind Jumeirah. So it’s a little early to start writing obituaries.

However, one American golf professional based in Dubai who did not wish to be named said the road ahead won’t be smooth for Leisurecorp. “They have to sell homes to justify the prize money they are putting up,” he said. “And people are just not buying homes right now. Real estate is not shifting.”

The Palm Jumeirah is a case in point. This massive manmade island not far from the Emirates Golf Course is fully built, with about 8,000 residential units, yet it has the feel of a ghost town.

“It’s only running at about 40 percent occupancy,” said one resident in the Bidi Bondi bar. “It’s pretty quiet around here.”

Back at Tiger Woods Dubai, excitement about the World No. 1’s initial design project grows. Workers are sodding the fairway at the fifth hole. Greenkeepers roll out the grass – cultivated from seed imported from Georgia and grown here in a vast nursery – like carpet over the fairways.

“The only potential problem with it is getting the sod to knit together,” general manager Patrick Bowers said. “But we’re confident.”

Confidence. It’s an emotion that built Dubai. These days, the City of Gold might need another pallet of it.

By: Alistair Tait of Golfweek