I stepped out onto the terrace of my hotel this week in Dubai on Jumeirah Beach to take in the landscape. To my right in the distance stood the Burj Al Arab, the iconic sail-shaped hotel. In front of me, the Palm Jumeirah, the giant mixed palm-shaped resort and villa complex. I attempted to count the cranes in front of me on the Palm and stopped at 50. If I hazard a guess, I would say there are three times that amount. Below the sound of the Ibiza bar music on the terrace, I can hear the rumbling of buildings being constructed, steel rods being delivered, concrete being poured.
This is the beat of Dubai, of double digit growth and a property market that to date has not found a ceiling. Travellers to the Gulf know it is very difficult to find a hotel room these days. There are 35 thousand in Dubai today, going to 150 thousand by 2015. Neighboring Abu Dhabi has 10 thousand, going to 75 thousand by 2030. All this building is accepted without hesitation by globalists who sit poolside to take in some sun along with all the construction. Further afield on the terrace I see a table full of businessmen in sunglasses poring over their documents with refreshments in hand.
I was in Dubai this week for the Arabian Hotels and Investment Conference and in that role chaired interviews with Mohamed Ali Alabbar, Chairman of property developer Emaar, Paul Griffiths, CEO of Dubai Airports and U.A.E. Minister of Foreign Trade Shaikha Lubna al-Qasimi. Ali Alabbar has notched up $65 billion of property projects in 17 countries, Griffiths is overseeing the expansion of Dubai International Airport and then moving on to build the largest airport in the world and Shaikha Lubna is busy serving as the ambassador not only for trade, but articulating the merits of openness in the U.A.E.
Stringing together their comments from those interviews, it is abundantly clear -- using an automobile analogy here -- that the pedal remains down to the floor. The sea of cranes will be more populated and the 150 different nationalities that now live in the Emirates will remain in the Gulf in search of riches. In historical terms, it reminds me of the California Gold Rush which started in 1848. While that lasted for seven years, no one is willing just yet to call an end to this boom. There is too much money being made and yes plenty of capital available within the region itself for expansion.
My visit coincided with yet another record for oil prices this week. Based on a conservative calculation, the six Gulf States will bring in more than $400 billion dollars this year from oil. They are always searching for new ways to deploy that money and they don’t have to look far to find investors from a Middle East market of more than 300 million people.
With that heady backdrop of growth, I spent time asking these players and others if there are any landmines waiting that may bring this growth spiral down to more reasonable levels. This is the first time after many visits that developers and investors talk of a potential correction. In traditional terms, that could be a fall of 10 to 20 percent. It is also the first time that many of them privately said it would be a healthy occurrence. Investment as they all know from experience is not a one way path that always points north.
Mohammed Ali Alabbar would not be drawn into my question if we are 50, 75, 85 or 95 percent through the development of Dubai. He calmly responded that was in the hands of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, the Ruler of Dubai and Vice President of the U.A.E. In sum he noted, we move on opportunity if it is prudent and it makes money for his now listed company. After a decade of business, Emaar has generated annual sales of more than $10 billion and turned a profit of $1.6 billion. That certainly is not bad for a former civil servant in Dubai.
The handful of major players who are implementing the master plans for Dubai and Abu Dhabi are attempting to keep their feet on the ground. For example, Griffiths of Dubai Airports said you won’t see a great big bang rollout for the new Terminal 3 in late August, à la Terminal 5 in London. That would not be prudent and only opens 'Brand Dubai' up to problems if all does not roll out as exactly planned. BAA could have learned a bit from this approach.
The numbers tell a less than measured story. Research out this week from Proleads tracked a total of $2.8 trillion in development projects in the Middle East, about of third of that in the U.A.E. alone. Demand for plants, personnel and equipment are growing at 20 percent a year. The 'sea of cranes' will not fade into the sunset just yet, but don’t be surprised if a storm blows through town to take some of the steam out of this fast-moving locomotive of growth.