VZCZCXRO2144
PP RUEHBC RUEHKUK RUEHROV
DE RUEHDE #0391/01 2970853
ZNY CCCCC ZZH
P 230853Z OCT 08
FM AMCONSUL DUBAI
TO RUEHC/SECSTATE WASHDC PRIORITY 6217
INFO RUEHAD/AMEMBASSY ABU DHABI 3247
RUEHEE/ARAB LEAGUE COLLECTIVE
RUEHDE/AMCONSUL DUBAI 9431

C O N F I D E N T I A L SECTION 01 OF 02 DUBAI 000391 
 
NEA/ARP FOR MASILKO, SIPDIS 
 
E.O. 12958: DECL:  10/22/2018 
TAGS: PINV ECON EFIN PGOV ETRD AE
SUBJECT: DUBAI'S CITYSCAPE 2008 - (SUR)REAL ESTATE AMID FINANCIAL 
CHAOS 
 
DUBAI 00000391  001.2 OF 002 
 
 
CLASSIFIED BY: Paul Sutphin, Consul General, U.S. Consulate 
General Dubai, State. 
REASON: 1.4 (b), (d) 
 
 
 
¶1. (C) Summary: Even as world financial markets tumbled and 
investor fears over an economic slide grew, bold (and costly) 
new projects for expanding the "Dubai dream" to even greater 
heights were unveiled at the seventh annual "Cityscape Dubai" 
exhibition October 6-9, the commercial to commercial real estate 
trade show that is one of the regions largest commercial 
exhibitions.  Despite developer's big plans and big glitz, 
including unveiling of the new Dubai government developer 
Meraas' USD 350 billion "Jumeirah Gardens" project, there was a 
constant undercurrent of concerned discussion of the real state 
of Dubai (and regional) real estate, including market regarding 
demand, capacity and liquidity - and a distinct underlying 
uncertainty about how much is too much for the world's biggest 
construction site to bear, given the drying up of readily 
available commercial capital.  End Summary. 
 
(Sur)real Estate Dreams 
 
----------------------------- 
 
¶2. (SBU) Over 1,000 exhibitors and 60,000 participants (up 27 
percent over 2007) converged on Dubai's convention center to 
hear the details and view spectacular, often room-sized models 
of some of the world's most ambitious construction and 
development projects.  The Dubai government seeks each year to 
use the huge exhibition, which includes a smattering of 
prominent U.S. architects, property developers, and consulting 
firms, to build confidence and interest in the local and 
regional commercial real estate market.  (Comment:  This premise 
lent the glitzy event a particularly surreal quality this year, 
given the current global financial crisis, with developers, 
agents, and others in the industry working hard to focus 
attention on the expensive miniature renditions of their grand 
plans on display, rather than the cash-short world outside of 
the exhibit hall. End Comment.) 
 
Impact Inevitable, Despite Brave Faces 
 
---------------------------------------- 
 
¶3. (C) Unsurprisingly, the developers with whom we spoke all 
expressed some degree of optimism about the local real estate 
market, noting that in times of trouble, real property is the 
one of the most reliable investments.  Despite this, most 
developers admitted drops in liquidity levels; regional income 
from external investments; contractions in foreign capital 
coming in to the market; and tightened local lending practices 
(in the face of several unfolding local financial scandals) 
would undoubtedly have a significant, negative impact on many of 
the projects on display.   (Note: Of course, each developer had 
a thorough explanation of why his or her particular venture was 
immune to this constellation of problems.)  Contacts in the 
banking sector have said to us that developer debt servicing is 
already a problem, particularly for "second tier" or newer 
developers, and that they - even more than local bankers or 
construction companies - will bear the initial brunt of the 
crisis.  Reportedly (we have not been able to confirm) UK banks 
HSBC and Barclays, both significant players in the local market, 
have halted new lending for real estate projects for the rest of 
the year.  Other sources have said project cancellations are on 
the increase; one claimed at least nine medium-sized, 
multi-building projects had been cancelled already. 
 
Dubai Government Entities - Steady on, at least for now 
 
--------------------------------------------- ------------ 
 
¶4. (C) Those companies largely linked to or owned by the Dubai 
government, including Nakheel, EMAAR, Dubai Properties, Sama 
Dubai and newcomer Meraas, all unveiled new projects ranging 
from massive to considerably large, with a peculiar air of 
indifference to the financial pressures facing their less 
connected colleagues.  (Comment: and despite widespread rumors 
that many of these companies were having significant cash-flow 
problems and that Dubai has sought financing assistance from 
cash-rich Abu Dhabi as a result. End Comment.)   Nakheel - part 
of the Dubai World family of companies and the developer of 
Dubai's Palm island projects - unveiled its massive model of the 
planned  "tallest building in the world" at over one kilometer 
(the model alone was some 25 feet tall) - overtopping EMAAR's 70 
percent-complete Burj Dubai, currently the tallest structure in 
the world, by some 200 meters.  New wholly Dubai 
government-owned developer Meraas (which has grown from 3 to 135 
employees over the last year) unveiled a massive model of 
"Jumeirah Garden City" - a project between the northern end of 
 
DUBAI 00000391  002.2 OF 002 
 
 
Dubai's Sheikh Zayed Road and the Gulf coast.  The project, 
should it come to pass, will involve razing and reconstructing 
of much of Dubai's lower-middle class section of Satwa (already 
underway, to a degree), and will include waterfront land 
extensions, a landmark triple 150 story skyscraper (Dubai One) 
with a canal flowing between the buildings, and a range of other 
new buildings and facilities set to cost USD 350 billion. 
 
¶5. (C) Like "Jumeirah Garden City," and continuing a trend of 
recent years, many of the most ambitious projects are set for 
Dubai's existing city center, effectively wiping out existing 
residential and commercial districts to make way for higher-end 
housing, shopping, and business.  Coupled with this "out with 
the old, in with new" approach, however, was a, for the first 
time, prominent focus on (a degree of ) environmental 
sustainability and the re-introduction of traditional 
architecture and design -- particularly adjacent to Dubai's 
traditional center, The Creek --  to strengthen Dubai's 
indigenous culture that has largely been eroded by massive 
skyscrapers and planned communities. 
 
¶6. (C) Comment:  While at Cityscape, we spoke with analysts from 
real estate consultancy firms Colliers International and Jones 
Lang LaSalle.  Both were, understandably, more willing to 
concede the negative medium and longer term impact of pressures 
on Dubai's real estate market than their property development 
counterparts.  However, despite a consensus that a significant 
slowdown has begun -- and was, in fact, overdue in Dubai's 
overheated market -- they gave little credence to speculation 
that a full-fledged real estate collapse is in the offing.  Both 
expect to release updated reports on Dubai's real estate market 
outlook in the coming weeks; we hope the reports will provide a 
balanced analysis of the questions surrounding one of Dubai's 
most important business sectors.  We will continue to follow 
closely the outlook for Dubai's overvalued real estate market 
and, more importantly, the impact of a necessary correction on 
its already struggling banks and financial sector.  End Comment. 
SUTPHIN