November 29, 2009
In early 2008, I was in Dubai on assignment for Travel + Leisure and found myself struggling with the logic of the place. People –architects, developers, publicists, taxi drivers — kept explaining to me that Dubai was building endless towers, theme parks, artificial islands, entire districts (like the Waterfront development with its projected population of 1.5 million) because it was going to emerge as the world’s leading financial center, displacing cities like London, New York and Hong Kong. A new planet would form with Dubai at its center and despite the fact that the population of actual Emiratees was quite small, moneyed people from someplace else would eagerly gobble up a stupefying number of condos and villas. Now, as Dubai seeks a bailout for the second time in a year, it seems increasingly clear that I could never quite grasp the logic of the boom there because there was no logic. It was, much like the housing bubble in this country, predicated on infinite demand for real estate that was only of any value in times of infinite demand.
This paragraph jumped out at me from yesterday’s New York Times:
Now, just as Bear Stearns was a harbinger of a string of failures of overly leveraged investment banks, the concern is that Dubai could be the canary in the coal mine for heavily indebted countries. The debts of everyone, including Japan and the United States, not to mention emerging markets, have risen greatly as the countries have fought the ravages of the global recession.
While I have no doubt that Dubai’s troubles have the potential to further screw things up — for one thing, they own Barneys — I don’t believe that the mega-Emirate is typical of heavily indebted nations. We’re talking about a government that is the ultimate speculative real estate developer. When China builds a brand new city to house, say, 300,000, they are building it for a very real population.* Dubai, by contrast, builds at an unprecedented pace for market that, as it turns out, is imaginary.
The photo above is how the Dubai skyline looked from a boat a short distance off shore, murky, like a mirage. I snapped it while touring the The Palm, several clusters of artificial islands shaped like palm trees and The World, another cluster of islands shaped like the countries of the world. Below is a Palm frond, full of McMansions, “villas” in local parlance, squeezed together at Fire Island density. The World, as of March 2008, was utterly uninhabited. The next group of artificial islands was going to be called The Universe,but I’m guessing that current circumstances may have put a damper on those plans.
*Actually, China may also be building for an imaginary population.