Burj Dubai sets records and makes profits

By Malcolm Borthwick Editor, Middle East Business Report, BBC World, Dubai Towering ambition: the Burj dwarfs its neighbours - and all other world towers In recent years Dubai has grabbed the headlines with audacious offshore islands, rotating buildings and a seven star hotel. On Monday it opened the world's tallest building, Burj Dubai. At more than 800m, Burj Dubai smashed the previous world record, which was held by Taiwan's 508m Taipei 101. It's about twice the height of the Empire State Building, you can see its spire from 95km away and the exterior is covered in about 26,000 glass panels, which glisten in the midday desert sun. The design of the building posed unprecedented technical and logistical challenges, not just because of its height, but also because Dubai is susceptible to high winds and is close to a geological fault line. "You have the solutions for it but you always wonder how it will really work," Mohamed Ali Alabbar, chairman of Emaar, the developer behind Burj Dubai told the BBC. "We have been hit with lightning twice, there was a big earthquake last year that came across from Iran, and we have had all types of wind which has hit us when we were building. The results have been good and I salute the designers and professionals who helped build it." West to East shift One of the companies behind the Burj was the Canadian-based wind engineering firm RWDI. Extreme wind speeds on the ground in Dubai can reach 50km an hour. At the top of the building it can be three times as fast. Wayne Boulton, general manager of RWDI's wind engineering team in the Middle East, explains how they tested the building for wind resistance. "We constructed a scale model and put it in a wind tunnel," he says. "In the wind tunnel we are able to test a number of different wind speeds and directions. We can test the pressure you would get on the surface of the building under normal conditions and also under more extreme events." The last couple of decades have seen a shift in the building of skyscrapers from the West to the East. Four out of five of the world's tallest buildings are in Asia and the Middle East. Burj Dubai amid the Dubai skyline "It comes down to confidence," says Andrew Charlesworth from property consultants Jones Lang LaSalle. "A lot of these emerging economies see themselves as important players in the world and want to show they can deliver these sort of projects. "The wealth of the world is shifting from the West to the East and emerging economies want to highlight their future expectations in terms of where they are gong to be positioning themselves globally." White elephant? Dubai is a city of superlatives, where everything has to be the biggest and the boldest. But like many of the world's past tallest buildings, Burj Dubai was planned and built during the boom years, and finished during a property crash. The Empire State Building was completed during the Great Depression in the 1930s and the Petronas Towers in Malaysia during the 1990s Asian financial crisis. This has led many to question whether this latest record breaker is a white elephant. Though Mohamed Ali Alabbar argues it is anything but. "As of today we have sold 90% of the building and we expect it to be 90%-occupied," he says. "We were lucky to make more than a 10% return. Originally we thought we'd be lucky to break even, because we can make so much money from the land around Burj Dubai which is a 500-acre site." BURJ DUBAI IN NUMBERS 95: distance in km at which its spire can be seen 504: rise in metres of its main service lift 57: number of lifts 49: number of office floors 1,044: number of residential apartments 900: length in feet of the fountain at the foot of the tower, the world's tallest performing fountain 28,261: number of glass panels on the exterior of the tower Dubai opens world's tallest tower In pictures: Building the Burj Dubai The fact that the developer has made a profit on its $1.5bn (£928m) investment has been helped by the fact that it bought the land with equity and not cash, and that it pre-sold most of the apartments and offices before the property crash. Investors have already handed over 80% of the value of the apartments and offices, and will pay the remaining 20% on moving in. And in contrast to many unfinished developments in Dubai, the default rate among investors has been low. But for investors, it has been a mixed picture. Fortunes have been won and lost on the Dubai property market, which has collapsed in spectacular fashion. Like many properties here, Burj Dubai was sold "off-plan" or before the building was completed. Offices and apartments went on sale in 2004 and most were snapped up by both local and international investors in just two days. Mohamed Abdul Hadi is one local investor who made millions out of Burj Dubai long before the building was completed. "In 2007 we bought three floors on Burj Dubai," he told the BBC. "The first investor paid 2,500 UAE dirhams ($680; £420) per square foot. We bought at AED 3,500 and one year later we sold at around AED 5,000. Look at the profit, where else can you have this but Dubai? And with no taxes." Oversupply But those who invested late will be nursing large losses, according to Saud Masud, a real estate analyst at Swiss investment bank UBS. "Late stage investors may find this a lot more challenging because property prices in Dubai have come down by 50% and we think prices are likely to go down another 30%," he says. "We have an oversupply in the property market today. We think it will reach 25% to 30% vacancy rates for residential property in a year's time, and for commercial property it's already 40%. Burj Dubai is not immune to that." The landscape of Dubai has changed dramatically over the last two decades. Sheikh Zayed Road is the 12-lane super-highway which runs through the city and is named after the UAE's founding father. Twenty years ago there were just a few tall buildings here, now there are hundreds, all jostling for space. But in the three years that I've been here, the frenzied pace of construction has slowed down and many cranes now stand idle. Developers are holding back on new multi-billion dollar flagship projects and focusing on finishing existing projects instead. About $190bn worth of Dubai real estate projects are currently on hold, according to Middle East Economic Digest. As in many parts of the world, banks are reluctant to lend and investors are reluctant to spend. Burj Dubai could mark the end of an era for skyscrapers in the Gulf - at least in the short term.

Dubai opens world's tallest tower, renames it Burj Khalifa Module body 1 hour, 37 minutes ago By Adam Schreck, The Associated Press DUBAI, United Arab Emirates - Dubai opened the world's tallest skyscraper Monday, and in a surprise move renamed the gleaming glass-and-metal tower Burj Khalifa in a nod to the president of the UAE and leader of neighbouring Abu Dhabi - the oil-rich emirate which came to its rescue during the financial meltdown. A multimedia presentation witnessed by Dubai's ruler and thousands of onlookers at the base of the tower said the building was 828 metres tall. Dubai opened the tower in the midst of a deep financial crisis. Abu Dhabi has pumped billions of dollars in bailout funds into the emirate as it struggles to pay its debts. Sheik Khalifa bin Zayed Al Nahyan is the ruler of Abu Dhabi and serves as the president of the United Arab Emirates, the federation of seven small emirates, including Dubai and Abu Dhabi. Analysts have questioned what Dubai might need to offer in exchange for the financial support it has received from Abu Dhabi, which controls nearly all of the UAE's oil wealth. Abu Dhabi provided direct and indirect injections totalling $25 billion last year as Dubai's debt problems deepened. Dubai's ruler, Sheik Mohammed bin Rashid Al Maktoum, in recent months has increasingly underscored the close relationship between the two emirates. Sheik Mohammed serves as vice-president and prime minister of the federation. The developer of the newly opened tower said it cost about $1.5 billion to build the tapering metal-and-glass spire billed as a "vertical city" of luxury apartments and offices. It boasts four swimming pools, a private library and a hotel designed by Giorgio Armani. The Burj's developers say they are confident in the safety of the tower, which is more than twice the height of New York's Empire State Building's roof. Greg Sang, Emaar's director of projects, said the Burj has "refuge floors" at 25 to 30 storey intervals that are more fire resistant and have separate air supplies in case of emergency. And its reinforced concrete structure, he said, makes it stronger than steel-frame skyscrapers. "It's a lot more robust," he said. "A plane won't be able to slice through the Burj like it did through the steel columns of the World Trade Center." Dubai was little more than a sleepy fishing village a generation ago but it boomed into the Middle East's commercial hub over the past two decades on the back of business-friendly trading policies, relative security, and vast amounts of overseas investment. Then property prices in parts of Dubai collapsed by nearly half over the past year. Now Dubai is mired in debt and many buildings sit largely empty - the result of overbuilding during a property bubble that has since burst. Despite the past year of hardships, the tower's developer and other officials were in a festive mood, trying to bring the world's focus on Dubai's future potential rather than past mistakes. "Crises come and go. And cities move on," Mohammed Alabbar, chairman of the tower's developer Emaar Properties, told reporters before the inauguration. "You have to move on. Because if you stop taking decisions, you stop growing." Dubai, which has little oil of its own, relied on cheap loans to pump up its international clout during the frenzied boom years. But like many overextended homeowners, the emirate and its state-backed companies borrowed too heavily and then struggled to keep up with payments as the financial crisis intensified and credit markets froze up. Meanwhile, speculators who had fuelled Dubai's property bubble disappeared along with the easy money, revealing a glut of brand-new but empty homes and crippling many of the emirate's property developers Dubai shocked global markets late last year when it unexpectedly announced plans to reorganize its main state-run conglomerate Dubai World and sought new terms in repaying some $26 billion in debt. The building boasts the most storeys and highest occupied floor of any building in the world, and ranks as the world's tallest structure, beating out a television mast in North Dakota. "We weren't sure how high we could go," said Bill Baker, the building's structural engineer, who is in Dubai for the inauguration. "It was kind of an exploration ... A learning experience" Baker, of Chicago-based architecture and engineering firm Skidmore, Owings&Merrill, said early designs for the Burj had it edging out the world's previous record-holder, the Taipei 101, by about 10 metres. The Taiwan tower rises 508 metres. Work on Burj Dubai began in 2004 and moved ahead rapidly. At times, new floors were being added almost every three days, reflecting Dubai's raging push to reshape itself into a cosmopolitan urban giant packed with skyscrapers. During the busiest construction periods, some 12,000 workers laboured at the tower each day, according to Emaar. Low-wage migrant workers from the Indian subcontinent provided much of the muscle for the Burj and many of Dubai's other building projects. At their peak, some apartments in the Burj were selling for more than $1,900 per square foot, though they now can go for less than half that, said Heather Amiji, chief executive of Dubai real estate consultancy Investment Boutique. She said some buyers may struggle to find tenants at going rates once the tower's expected high service charges are factored in. "The investment community is quite divided," she said. "They're not sure how it's going to play out."