By Andy Sambidge
Business Monitor Int'l says mega project should be downsized to fit 'harsh realities' of real estate market
A massive downsizing of the multi-billion dollar Dubailand project is needed to fit in with the "harsh realities" of Dubai's battered real estate market, according to Business Monitor International.
In a new report, BMI analysts said "a significant scaling down" of the $91bn project is needed if it is to become a reality.
BMI's analysis of Dubailand comes just days after Dubai Properties Group said it was in talks with developers to review their contracts as part of plans to get the project back on track by the year-end.
The mega-project was one of the most ambitious entertainment resorts planned for Dubai but was placed on hold in 2008 after the credit crunch saw the emirate’s real estate market collapse.
The development was originally slated to be twice the size of Walt Disney World Resort and boasted tie-ups with Universal Studios and Legoland.
The BMI report said: "While plans to re-launch the massive leisure project by year-end certainly send out positive signals about the recovering sentiment within the market, we believe serious thought (and downsizing) will be needed if the project is to fit in with the harsh realities of Dubai's subdued property market in 2011."
BMI added that it saw the decision to re-launch the landmark project as part of a "broader trend observable within among developers in the emirate".
"Sensing a marginal improvement in market sentiment and unwilling to write-off projects altogether; many developers are now pushing ahead with developments that have been stalled since the beginning of the crisis," BMI said.
"Such developments continue to flood a market that continues to suffer from significant over-supply, despite the Dubai Real Estate Regulatory Agency's decision to cut a large chunk of planned developments in the latter half of 2010.
"With this in mind and demand for new projects still weak, we believe a significant scaling down of Dubailand's ambitions is needed if it is to fit the economic realities facing Dubai in 2011."
Dubai had the world’s fastest-growing property market from 2006 to mid-2008 because of rising demand from a growing expatriate workforce and speculation fuelled by borrowing.
Prices quadrupled in the six years following the 2002 decision to allow foreign ownership of property in designated areas.
The global financial crisis sparked the collapse of the emirate’s property sector, wiping more than 60 percent off house prices and sending speculators fleeing from the market.
About 50 percent of Dubai real-estate projects were cancelled or suspended after the collapse.
Dubai Properties Group said earlier this week that it planned to unveil a revised masterplan for the mega-project later this year.
One can only agree with BMI's view, there is still an element of self denial in that the property sector will somehow become a vibrant asset bank again! They are now saying in Europe and North America it is no longer safe to see property as a risk free resilient element of your pension portfolio with more pain ahead.
Build selective theme parks and see how they do footfall wise by all means, but take housing as a secondary phase say ten years from now!
Remember that by reinstating Dubailand projects, Dubai Properties is also hoping to reinstate ongoing next stage payments from developers if they deliver infrastructure. Also a number of 3rd party developers have already invested large amounts in those halted projects which is otherwise dead and buried money.
Unfortunately delivering more residential and retail property to help pay for theme parks is not an economic antitode, just a further dilution of existing market value. Learn from Spain!
Dubai needs attractions not more homes.
What Dubai needs is seriousness in all aspects in the property business. DPG needs to solve the issues "they" created in all existing projects from JBR to Executive towers and others. They need to complete these projects first and show they are a trust worthy company (not the case today). Then they will get enough credibility to start what ever project to attract tourists. Remain in denial and make anouncements as if nothing happens does worry investors.
What Dubai Government needs to do is to attract tourist and that too in millions to revive the economy and continue to position Dubai as a world class tourtist destination.
A theme park such as Universal Studios, Legoland or the City of Arabia Dino Park will draw tourist from the region and other continents.
Especially now with the unrest across the region, UAE and Dubai are still considered safe places and Dubai should capitalize on the same and focus limited resources (both money and time) into economy boosting and employment creation. Property demand and supply equilibrium will automaticaly arise with influx in expatriate.
@ Red Snappa: I agree with you, the challenge in Dubailand was theme parks are not as profitable as the residential. Thats why we used to package all attractions with residential so it would be inviting enough for investors to invest in Dubailand projects.
NO - they need to keep dubailand just the way they had planned it to be .If not better. Otherwise why would people bother coming if its not magnificently mind boggling they can go else where for a theme park resort. Dubailand if succesfully built it will definatly be pioneers in a better future therefore with the world wishing to visit dubailand there ex fast market growth will be once again.
They'll be no market growth for 5 years Waleed , the worlds in recession and a theme park is not what Dubai needs . Dubai needs good legal framework and procedure on property law , rights for investors and international investment again , only then can you think about building a theme park .
Wishing for the best and hoping you'll turn the corner is not going to happen i'm afraid .
Salvador, you have hit the Nail on the Head - Trustworthy is the Magic Word. None of the Developers in Dubai or UAE in general are really Trustworthy. Some are slightly better than others, but still there is an element of Hidden Agenda's with them. Emaar, Nakheel & Dubai Properties are perhaps the largest ones, and they have not delivered 100% of what they promised with the exception of Emaar to a certain extent. JBR, Discovery Gardens etc are shambles - with lots of promised items simply not there.
could not agree more with Lionheart. Lets get some basics right first and some transparency in the market both for overseas investors as well as residential ones too. To much double-talk and double-dealing will ensure the recovery will be long delayed.
Dubai needs attractions, not more properties. The current course of building Universal Studios and Legoland is the right one. If anything, those are the two things that should have been built already. Universal was due to open in 2010, and Legoland in 2011. Just think of all the tourist money that Dubai flushed away instead on empty office buildings and residential towers. What a waste of money. The theme parks are not only profitable themselves (at an albeit minor margin), but they have a great knock-down effect on hotels, restaurants, malls, transportation, etc., because they persuade tourists to stay longer and spend more money. Dubai needs to build those two theme parks immediately with no delay. I can shop and swim anywhere in the world but there is no Universal Studios within thousands and thousands of miles of Dubai, and none in Europe. Build it with Harry Potter land in Universal and the money will rain down on Dubai.
Dubai has all infrastructure but doesn't have real attractions. It must encourage the tourists which brings more income to the government.