WAN Business Correspondent David Taylor rounds up the month's most important industry dealings...
If the current global recession/depression/meltdown has done nothing else it has polarised the battle and intense rivalry between the two most famous and largest emirates: Dubai and Abu Dhabi.
Where once, only a matter of years ago, Dubai was the picture of development boom – all gold, glamour, skyscrapers, bling, Premiership WAGs and swanky reclaimed islands – Abu Dhabi has now quietly nudged ahead. And where Dubai was, in a sense, the sunglasses-wearing spendaholic with a Gold card, Abu Dhabi is the patient, canny, long-term investor, blessed with natural resources.
Or at least that is the picture on the surface.
It’s best to take up the story last November, when Mohammed Alabbar, the head of Dubai Marina developer Emaar and a member of Dubai’s ruling council, made an important speech at the Dubai International Financial Centre. This was a day after the UAE had announced it would help merge and finance two struggling mortgage lenders – Amlak and Tamweel. Dubai, said Alabbar, was going through a ‘healthy’ correction to its property prices. True, the emirate did in fact owe something like $10bn in sovereign debt and extra $70bn owed by affiliate companies. But, Alabbar added, its $350bn in estimated assets would cover that easily. However, even he could not hide the fact that Abu Dhabi, the home of the UAE federal government, has a healthier balance sheet and more fingers in more political pies – plus a rosier outlook all round.
Furthermore, just last week, another indication of Dubai’s downturn was that Standard & Poor's cut its ratings on four Dubai-based banks, again referring to a ‘sharp correction’ in real estate that has increased risks to the Dubai economy and raised hurdles for the banks. Construction and real estate, remember, account for almost 50 per cent of Dubai's GDP.
So why has a split emerged? Largely, Abu Dhabi’s current relative financial muscle has drawn upon its oil revenues, state-backed investment funds and its unwillingness to mirror Dubai’s desires to spend, spend, spend. Abu Dhabi is home to a tenth of the world’s oil reserves, making it the richest emirate and, despite falls in oil prices, better insulated against the troughs of the property cycle. In this way it has accrued a huge budget surplus where Dubai has tended to rely on international capital flows. And, at the moment, of course, cash is flowing at glacial rates, if at all. As a consequence, Dubai’s deficit is expected to hit around $1.1 billion this year, and its once famous double-digit, boom-time growth is set to hit around 4%-6% in 2009, relative to Abu Dhabi’s more resilient 7 per cent.
Abu Dhabi is also challenging its rival directly in many areas – one such was through launching Etihad Airways in 2003 to do battle with Emirates, with an expansion of its airport to take 20 million passengers per year by 2010, to bring it nearer to Dubai’s 25 million. And its Abu Dhabi Plan 2030 aims to treble the Emirate’s population to over three million whilst providing a fitting environment for such a ‘global city’. Dubai airport’s own $1.85 billion expansion plans have, by contrast, been halted.
But it is in more mainstream property and construction projects that the real damage has been done. Dubai’s once supremely powerful property boom – epitomised by projects such as the Burj Al Arab hotel or the under-construction Burj Dubai tower – tallest hotel and tallest building in the world, respectively – and the reclaimed residential islands of Palm, has dwindled alarmingly in the face of economic reverses. Key projects have been put on hold and companies have been making large-scale redundancies, with well-documented footage of luxury cars owned by fleeing, debt-ridden foreigners abandoned at the airport as their owners left for home. One such delayed scheme is golfer Tiger Woods’ project to build 100 villas, 75 mansions, 22 palaces and a 360,000 sq ft boutique hotel. Work on the Tiger Woods Dubai project, which also includes a 139,000sq ft clubhouse and is being developed by Tatweer, owned by the emirate and its ruler Sheik Mohammed bin Rashid Al Maktoum, has been delayed.
Another project linked to a golfer – this time Australian Adam Scott – has been sliced into the long grass completely. The Atrium at Waterfront – a 68-storey tower designed as two forms meeting at the 47th level, was halted after a deal to sell 40 per cent of the project to a company associated with Scott fell through. Leighton Holdings has also cut back projects, such as the $835 million Trump International Hotel and Tower on Palm Jumeirah. In all, property prices in Dubai have fallen some 40 per cent since their peak in September 2008 and house prices in the region are projected to fall by another 20 per cent in 2009.
By contrast, Abu Dhabi’s strategies appear to be more on track, helped by construction on infrastructural improvements and a development plan that has included investment in energy, technology and education. There are even newly opened outposts of New York University and Paris’ Sorbonne.
Abu Dhabi can also point to its $7.5 billion investment in Citigroup, overshadowing the usually-showier Dubai’s $1.5 billion investment in Sony, announced the day before.
There are other illustrious projects too, by developers such as Leighton Holdings, which has reignited its $1.6billion project to build the diamond-shaped, 74-storey Tameer Towers hotel and residential buildings in Abu Dhabi. Or the Abu Dhabi Grand Prix circuit on Aldar’s US $39 billion Yas Island project – Aukett Fitzroy Robinson has opened an office in Abu Dhabi to service its work on a 600-bed hotel project for developer Aldar Properties. Plus Ferrari World and Masdar City, the latter planned to be the world’s first zero-emission city.
Where Dubai has looked to building shopping malls, Abu Dhabi can display its commitment to becoming the cultural centre of the region, with projects such as a forthcoming Guggenheim Museum (the largest in the collection) designed by Frank Gehry and scheduled for completion in 2011. Another is a Louvre museum designed by Jean Nouvel on the Persian Gulf city-state's Saadiyat Island and set for completion in 2012 or 2013. Finally, there is also the Zaha Hadid–designed Performing Arts Centre, planned to be built within the multi-billion dollar cultural district.
One significant architect which has formally recognised Abu Dhabi’s importance in the region is Gensler. The biggest international architecture, design and planning firm in the world has opened a new office there as of June, cementing its relationship and commitment to the region, said the firm. Gensler is running projects in Abu Dhabi, Bahrain, Dubai, Kuwait, Oman and Saudi Arabia, with a portfolio in masterplanning that includes the Dubai International Finance Centre and the US $28 billion Saadiyat Island through to buildings such as the Gate Tameer Towers and soon-to-be-completed Ritz Carlton in Dubai. The multi-disciplinary firm has also completed interiors projects such as Abu Dhabi Commercial Bank and the Abu Dhabi Investment Authority.
It is no coincidence that the practice and many others such as HOK are perhaps recognising that in a polarised, credit crunch world, and in this particular rivalry, the momentum has shifted.
Move over Dubai, with your maxed-out Gold card. Abu Dhabi is where it’s at.
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