Tall Tales from Dubai

The Burj Khalifa in Dubai is a quarter-mile taller than any other office or residential tower in the world. It’s as tall as the World Trade Center’s twin towers—stacked on top of each other.

So a certain amount of awe is in order in covering its opening. Still, the press is way too ga-ga with this ribbon-cutting.

The Wall Street Journal (for whom I used to cover commercial real estate) writes that the skyscraper’s opening “could mark a turning point in Dubai’s fortunes and those of its ruler.” Why? Well:

Sheik Mohammed bin Rashid al Maktoum, the city-state’s 60-year-old hereditary leader, hopes the building and its surrounding $20 billion development will help enhance his reputation among international investors and restore Dubai’s allure as a business hub.

I’m sure he does.

The New York Times goes ahead and, bizarrely, calls the building “a success”:

To be sure, some have questioned the utility of such a towering project. At least three foreign workers died during the construction and at a time of increasing concerns over global terror, such a building could well pose an inviting target.

But for a city-state that from its very beginning has taken pleasure in proving its doubters wrong, the Burj is evidence that if you build it big and brash enough the people will come, from near and far.

All the same, the Burj’s success by no means signals a recovery in Dubai’s beaten-down real estate market, where prices have collapsed by as much as 50 percent and may have further fall according to analysts.

Wow, this is one of the few times I’ve understood Matt Winkler’s ban on “but” and other hedging devices. Each of those paragraphs hedges the other. “To be sure… but… All the same…” That may be more head-spinning than the observation tower at the 124th floor of the Burj.

Why would the NYT call the Burj a success? Probably because it, like the Associated Press swallows the company line whole here. Here’s the AP:

At a time when a number of Dubai’s newly built office towers stand empty, it is 90 percent sold, according to the building’s developer Emaar Properties.

I’m 90 percent not sold on that figure and even if it’s true, there’s needed context missing. Here’s the Los Angeles Times critic Christopher Hawthorne writing about the Burj last week:

And so here is the Burj Dubai’s real symbolic importance: It is mostly empty, and is likely to stay that way for the foreseeable future. Though most of its 900 apartments have been sold, virtually all were bought three years ago — near the top of the market — and primarily as investments, not as places to live. (“A lot of those purchases were speculative,” Smith, in something of an understatement, told me in a phone interview.) And there’s virtually no demand in Dubai at the moment for office space. The Burj Dubai has 37 floors of office space.

Though Emaar is understandably reluctant to disclose how much of the tower is or will be occupied — it did not reply to e-mails sent this week on that score — it’s fair to assume that like many of Dubai’s new skyscrapers it is a long, long way from being full.

If a company isn’t replying to emails about something like that a time like this you can bet it’s because the news isn’t good. And Hawthorne is an architecture critic doing reporting reporters should be doing and aren’t here.

The Journal, though it does report in an aside that prices are cratering, doesn’t mention the central fact that Dubai’s real estate market is one of the most overbuilt in the world—ever. That idea would go a long way toward preventing the WSJ from writing something like this:

It is hoped that the tower will redress the growing international perception of the emirate as an economic delinquent, instead of a role model for the Arab world.

Reuters doesn’t mention the overbuilding, either, though it takes a better, more skeptical angle. Here’s its lede:

Dubai opened the world’s tallest structure in a glitzy ceremony meant to put a brave face on crushing debt woes, leading some to wonder whether the tower is the emirate’s crowning glory or its last hurrah.

Bloomberg starts off weak, but gets into some of the real economic issue: The commercial property market and the likely fallout of the building:

The Burj’s occupancy rate may reach 75 percent this year, with office leasing proving the biggest challenge for investors, said Roy Cherry, an analyst at investment bank Shuaa Capital PSC…

“It may still run at a premium to the rest of the market but I’d be surprised if there were no defaults and if vacancy rates didn’t creep up,” since a large proportion of the developer’s sales were financed through mortgages, said Saud Masud, a Dubai-based analyst at UBS AG. “This is a symbol of the economic momentum that Dubai had and an ironic reminder of its property bubble.”

It reports that apartment prices in the building had already fallen 60 percent before it opened.

Even if it succeeds in filling up half its space in the first year—no sure thing— it won’t be any turning point for Dubai or anything like that. It will just be draining people away from all the other empty buildings in Dubai, which won’t be filled for years and years.

I can’t put it any better than the LAT’s Hawthorne does on what the real meaning of the Burj is—and none of the news stories I write about here comes within 2,717 feet of him— so I’ll leave you with this:

But the hyper-confident Dubai that Smith’s tower was designed to mark and call global attention to is already dead, as is the broader notion, which the emirate came to symbolize over the last decade, that growth can operate as its own economic engine, feeding endlessly and ravenously on itself.
If the Burj Dubai is too shiny, confidently designed and expertly engineered to be a ruin itself, it is surely the marker — the tombstone — for some ruined ideas.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.