 |
Evidence is mounting that Dubai has an oversupply of, well, just about everything.
According to a new report by Japanese bank Nomura Holdings, more than 1 million square feet of commercial space is scheduled to come online in Dubai in the next two years, with another 10 million square feet scheduled for Abu Dhabi. And even though prices are falling, another 65,000 residential units are under construction.
“We estimate around 100,000 white-collar jobs at least would need to be created in Dubai and 50,000 in Abu Dhabi alone to satisfy oncoming supply,” Chet Riley, a Dubai-based analyst at Nomura, wrote in a recent note to clients.
Except employment is falling and prices are plummeting as much as 50 percent in some residential developments, coverage in Property Wire notes. (Attendance at the recent Cityscape conference was down 50 percent, the magazine reports.)
With expats heading home, a recent study suggests Dubai could see a 10 percent decline in population this year, the National reports.
ING Group chief of Asian real estate Richard Price recently cited the oversupply as the main reason his company’s $150 billion real estate fund is not investing in the Middle East. “There is an awful lot of speculative development that remains unsold or unused and I don’t personally understand where the demand is going to come from,” Price said during Cityscape.
Nomura’s report makes almost the same exact point. “Two years ago, developers were initiating fanciful developments at the peak of the market, which they are now delivering into the trough,” Nomura’s Riley wrote. “This has increased the likelihood of defaults and smaller developers do not have the luxury of consolidating development pipelines.”
But some industry executives insist there are signs of stabilization in the market. “The biggest risk was in the first quarter, but debtor days [average payment times] are now steadily improving and there’s still money going into the top of the hopper,” Adrian Ringrose, c.e.o. of construction firm Interserve, told Building.
State-owned developer Nakheel recently announced the sale of two more islands in The World, the man-man collection of islands, for about $65 million each. Although some work may start this year, major construction on the iconic project could begin in the second quarter of 2010, Nakheel says.
