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Heriot-Watt University - School of the Built Environment Development of Dubai A dissertation submitted in partial fulfilment of the requirements for the degree of MSc. Urban and Regional Planning Mahnaz Abulqasim 071168557 Dissertation supervisor: Derek Kerr i August 2008 DECLERATION I ……Mahnaz Abulqasim…………, Confirm that this work submitted for assessment is my own work and is expressed in my own words. Any uses made within it of the works of other authors in any form (e.g. ideas, equations, text, programmes) are properly acknowledged at the point of their use. A full list of references employed has been included. Signed: ……………………………….. Date: …………………………………. i CONTENTS List of Figures ……………………………………………………………………. iv List of Tables ………………………………………….………………………... v Acknowledgment ……………………………………………………..…………….. vi Abstract ………………………………………………………………………….…. vii List of Abbreviations …………………………………………………………………… viii Chapter 1: Introduction ……………………………………………………. 1 1.1 Introduction ………………………………………………………...…. 1 1.2 Aims and objectives …………………………………………………… 2 1.3 Methodology……………………………………………………………. 3 1.4 Structure of the research ……………………………………………. 4 1.5 Research limitation ……………………………………………………. 5 Chapter 2: Literature Review ……………………………………………. 6 2.1 Globalization, Urbanization and urban planning in the world ……...… 6 2.2 Urbanization and real estate market in the world ……….…………..... 9 2.3 Globalization in the Middle-East Region ………………………….... 10 2.4 International context of Dubai ………………………………...…. 13 2.5 Conclusion ……………………………………………………….…... 16 Chapter 3: Dubai Urbanization and Growth ……………………..…… 17 3.1 Introduction to Dubai City ………………………………………..….. 17 3.2 Dubai Urban Development ………………………………………..….. 19 3.2.1 Period from 1900–1955 ………………………………..….. 20 3.2.2 Period from 1956–1970 ………………………………..….. 21 3.2.3 Period from 1971–1980 ………………………………….... 22 3.2.4 Period from 1980–Present ………………………………..….. 24 3.3 Urban vision and property development ……………………..…….. 27 3.4 Emergence of Mega Cities ………………………………………..….. 28 3.5 Conclusion ………………………………………………………….... 34 ii Chapter 4: The Impact of Dubai's Rapid Development on the city …….. 35 4.1 Real Estate market …………………………………………………... 35 4.1.1 About Real Estate market in Dubai ………………………….… 35 184.108.40.206 Dubai's Strategic Vision …………………………… 36 220.127.116.11 Dubai – the forerunner in Property Market ……........... 41 4.1.2 The impact on Dubai Image in Property Market …………… 42 4.1.3 The impact on Real Estate Market ……………………………... 45 18.104.22.168 The outlook of Dubai property market …………… 45 22.214.171.124 Impact on Freehold Market …………………………… 47 126.96.36.199 Impact on Leasehold Market …………………… 51 4.2 The Urban Environment ………………………………………….… 54 4.2.1 Air pollution ………………………………………………….… 54 4.2.2 Water scarcity ………………………………………………….… 57 4.2.3 Pressure on natural resources ………………………………….… 58 4.2.4 Degradation of marine and coastal environment …………….….. 60 4.2.5 Influences on the city's architecture ……………………………. 63 4.3 Conclusion ………………………………………………………….… 66 Chapter 5: Conclusion ………………………………………………….… 67 References ……………………………………………………………….…………… 72 Appendix A- Sample of Interview ………………………………………………… 76 Appendix B- Main delay factors in Dubai supply market ……………………… 76 Appendix C- Environmental report 2008 conducted by Master C. Worldwide …. 80 iii List of Figures Figure 2.1 Urban population growth in western area region ……………….. 12 Figure 3.1 United Arab Emirates Map …………………………………….. 17 Figure 3.2 United Arab Emirates Map …………………………………….. 18 Figure 3.3 United Arab Emirates Location Map ……………………………... 18 Figure 3.4 Dubai in the 70's and 80's ……………………………………….... 21 Figure 3.5 Dubai Urbanization 1973 .......................................................... 22 Figure 3.6 Dubai Urbanization 1993 .......................................................... 23 Figure 3.7 Dubai Urbanization 2006 ……………………………………… 24 Figure 3.8 Dubai Urban Area Structure Plan (1993–2015) …………….. 26 Figure 3.9 Map of projects …………………………………………………. 28 Figure 3.10 Internet City …………………………………………………….. 28 Figure 3.11 Media City …………………………………………………….. 29 Figure 3.12 Festival City …………………………………………………….. 29 Figure 3.13 International City …………………………………………….. 29 Figure 3.14 Dubai International Financial Centre .............................................. 30 Figure 3.15 Dubai Marina ................................................................................ 30 Figure 3.16 Ski Dubai …………………………………………………….. 30 Figure 3.17 The Palm Islands …………………………………………….. 31 Figure 3.18 The World …………………………………………………….. 31 Figure 3.19 The Palm Islands …………………………………………….. 32 Figure 3.20 Dubai Mall ……………………………………………………. 32 Figure 3.21 Burj Dubai …………………………………………….………. 33 Figure 3.22 Madinat Al-Arab …………………………………………….. 33 Figure 4.1 Palm Jumeirah …………………………………………………….. 36 Figure 4.2 GDP Distribution 2006 ………………………………………….... 37 Figure 4.3 The distribution of Mega Project across the GCC countries……… 40 Figure 4.4 Shares of combined real estate and financial sector in Dubai's total GDP …………………………………………….. 41 Figure 4.5 Burj Al-Arab Hotel, Dubai …………………………………….. 43 Figure 4.6 Views from Dubai urbanization …………………………….. 45 iv Figure 4.7 Countries with the highest percentage of international migrants in total population, 1990 …………………………….. 46 Figure 4.8 Summary of the Freehold Market development …………….. 47 Figure 4.9 Expectation of Dubai property prices …………………………….. 48 Figure 4.10 Map for the freehold ownership in Dubai …………………….. 49 Figure 4.11 Dubai's Freehold law caveats …………………………………….. 50 Figure 4.12 Rise in rental rates …………………………………………….. 51 Figure 4.14 Lower rent Increase in middle income areas …………………….. 52 Figure 4.15 Traffic congestion in Dubai, 2008 …………………………….. 54 Figure 4.16 Dubai Metro under construction, 2008 …………………….. 55 Figure 4.17 Dubai Metro Rout Map, 2008 …………………………………….. 56 Figure 4.18 Dubai Metro Rout Map, 2008 .......................................................... 56 Figure 4.19 Ecological footprint per person, by country, 2003 ……………… 59 Figure 4.20 Artificial Island: Palm Jebel Ali, Palm Jumeirah, The World and Palm Deira ……………………………. 60 Figure 4.21 Corel Reefs in UAE ……………………………………………. 61 Figure 4.22 Damaged Corel Reefs in UAE ……………………………. 62 Figure 4.23 Reclamation for Palm Deira ……………………………………. 62 Figure 4.24 The Palm Jumeirah main divisions ……………………………. 62 Figure 4.25 Water channels in Palm Jumeirah ……………………. 62 Figure 4.26 Different view of modern Dubai …………………………... 64 Figure 4.27 Al Bastakiya Village ……………………………………. 65 Figure 4.28 Modern designs and traditional designs, Mina Al Salam Hotel on the right ……………………………. 65 List of Tables Table 4.1 GDP of the construction sector (AED Million) ……………. 41 Table 4.2 Population projection for Dubai (2007 – 2010) ……………. 46 v Acknowledgment I would like to thank my dissertation advisor, Derek Kerr, for his support, guidance and patience. Further thank goes to British Business Group in Dubai who supported me in the interview process. Special thank goes to my family whose encouragement has always been there through the whole academic year. Mahnaz Abulqasim Edinburgh, 2008 vi Abstract Globalization and rapid urban growth have become a common feature of most countries, particularly those of the third world. The outcomes and structure of modernization and urbanization in Dubai following their ruler's vision to establish Dubai as the hub of commerce, business and tourism in the Middle East Region, and specially with opening the market for foreigner freehold ownership in 2002, have attracted significant attention and interest from local and foreign property developers to invest in Dubai's real estate industry. Since then, significant inflows of capital as well as human resources have caused a rapid real estate and construction boom. The real estate development in recent years has become a hot issue as a result of the massive amount of investment and high selling prices. The overall aim of this research is to study Dubai's rapid development and its impact on the city's real estate market and urban environment. A major concern was the emergence of the mega city or ''city within city''. To understand the phases of urban growth and real estate development, along with the drivers that led to the property boom besides the consequences of Dubai’s rapid growth, secondary materials were examined. In addition, interviews were conducted with professionals in the study area, in order to obtain their opinion and insight about the research topic. The research finds that, while urban expansion and property development have been encouraged, the ongoing rapid development, including massive construction activities and waterfront projects, has had an extensive impact on the real estate market, resulting in high selling and renting prices and threats of losing foreign interest in future investment, besides the extensive degradation of urban environment. The research suggests introducing improved regulations to control and manage the property market, enhanced environmental management, as well as urban and economic policies to ensure a sustainable economic growth. KEYWORDS: Dubai, real estate, rapid development, impact vii List of Abbreviations: DTCM: Dubai Tourism and Commerce Marketing GCC: Gulf Cooperation Council countries (includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates) ICT: Information Communications Technology NGO: Non-Governmental Organisation UAE: United Arab Emirates USA: United State of America WWF: World Wildlife Fund viii Chapter 1: Introduction 1.1 Introduction Almost everything is remarkable about UAE, and specially Dubai city, from its tiny local population, oil prosperity, to its record breaking rapid real estate and construction activities. Fifty years ago, Dubai was a small trading village. Now it is a successful cosmopolitan city. Dubai has become a 21st century phenomenon. It has carried out an impressive transformation, managing to move its economy to finance, commerce, tourism, shipping and real estate markets. Dubai has become one of the most successful and fastest growing cities in the world. The changes in the economic, cultural and social characteristics of the city are remarkable. Dubai's economy, real estate market and construction activity are booming. Prospects for business and investors are equally blooming. The city has become the tourism, business and real estate hub of the Middle East region. The speed and scale of the development have become a concern, both nationally and globally. Moreover, the overheated real estate market has become a hot issue for citizens, the government and the world. Therefore, this dissertation will focus on studying and analysing Dubai's rapid development and its impact on the vibrant real estate industry and the urban environment of the city. It is a very important and interesting issue to find out the main drivers behind the prosperity of the real estate based economy and its consequences, which will help in addressing the problems toward mitigating such impacts to maintain the economic growth of the city. 1 1.2 Aims and Objectives The over all aim of this dissertation is to study Dubai's rapid development and its impact on the property industry and the urban environment. The key questions are: ''what have made Dubai's urbanization and development possible?'' and "What are the consequences of this rapid development in relation to Dubai's property market and urban environment?" To achieve the above aim, the following objectives have been adopted: To review academic research, articles and books on the subject of rapid development, emergence of mega cities, urbanization and globalization. To examine and analyze, through the case study of Dubai city, the history and background of its urbanization and the changes in its urban planning under economic transition. To investigate the structure and context that helped in facilitating Dubai’s rapid urbanization. To study and investigate the consequences of its rapid development and economic growth, and its impact on both the real estate industry and the urban environment of the city. To identify how to control development in relation to the city's strategic vision and environmental issues without losing the economic opportunities of rapid development. To analyze the findings and draw recommendations and a conclusion on the impact of booming rapid development and real state investment on the city of Dubai. 2 1.3 Methodology To obtain the research aim and objectives, a combination of several methodologies has been adopted for the investigation and analysis of this research; these vary from the literature review to primary data and secondary data collection. The biggest portion of this research will be dedicated to studying the city of Dubai. The research methodology was based on desktop research, using mainly secondary material. General literature from books, journal articles and research papers on globalization and urbanization has been the basis for chapter two. Information and data obtained from industry reports, releases from property companies, research papers, international reports, property developers/investors web sites, and documents produced by local government departments and ministries, have been the basis for chapter three and four. Data collected form secondary sources were very essential to understand the context and the phases of Dubai urban growth, its strategic vision, the real estate industry and the impact of the urbanization on the city. In addition, primary sources have also been used. Primary data were collected through interviews with key persons in the financial sector, real estate and construction industry, both local and foreign. The interview questions were grouped into three categories, including urban growth in Dubai, mega projects, and vision about Dubai’s future (see appendix - A). The interviews provided professional insights and opinions about the context of Dubai's rapid development and its consequences, which were incorporated in chapter three and four to support the argument. 3 1.4 Structure of the research Chapter Objectives Methods Chapter 1: Aim, Objectives, Methodology, Introduction Limitation. To review the subject of rapid development, urbanization and globalization, and to investigate the Based on Desktop Chapter 2: emergence of mega cities in the study and secondary Literature Review world, besides studying the material urbanization in the Middle East Region. Examine and analyze Dubai city, the Based on Desktop Chapter 3: Dubai history and background of its study, primary data Urbanization and urbanization and the changes in its (interviews) and Growth urban planning under economic secondary data transition. To study the consequences of its Chapter 4: Based on Desktop rapid development and economic The impact of study, primary data growth and its impact on both the Dubai's Rapid (interviews) and real estate industry and the urban Development secondary data environment of the city. Draw conclusion and offer recommendations about the impact Chapter 5: of Dubai's rapid development on the Conclusion urban environment and real estate industry of the city. 4 1.5 Research limitations Since the study is about Dubai, a city in the Middle East region, there was a shortage of academic papers and articles about it, as such materials are not easily available in this region. In addition, some statistics and financial reports in property markets were confidential and not obtainable, unless through purchase, and no budget was available for this. Also, the time span of the study made it difficult to obtain primary data; the interview questions were sent by email to key persons in the study area after extensive investigation and searching having been done to find the right person who is both in charge and available. Owing to the limited time span, it was difficult to do these interviews in person. Furthermore, other responses have not been received from several key agents, even though they showed initial interest to contribute. 5 Chapter 2: Literature Review This chapter will give an overview of the literature reviewed to investigate the urbanization and globalization that has taken place globally, the context of planning and globalization, and the relation between the real estate market and urbanization. This will give a better picture about the global forces that have affected many cities, and Dubai city in particular. It will be followed by a review of the international context of Dubai in the world and in the Middle East Region, to help in building a closer view of the statues of Dubai. 2.1 Globalization, Urbanization and urban planning in the world Planning, according its professional association around the world, has essential objectives which are intended to provide the balance among the aims of social welfare, economic efficiency and environmental sustainability. Basically, maintaining the balance between the planning aims states the pressure of diverse interests and groups. The global and local pressures need to be balanced with the creation of new insight into city vision. Through plans, the global forces will be defined and the spaces of globalization will be set out (Newman and Thornley, 2005, p.256). Although the planning approach for cities has considerable variations, it has a common concern within international competitiveness. There is a significant importance of economic globalization during planning for the future development of cities. The global economy involves important subsets of activities which may facilitate essential development, such as capital and labour flow; examples of capital flow are the Chinese investment from Hong Kong and Taiwan, and Los Angeles funds from the Korean development. Certainly, the global economy flows are not the entire business of the cities; there are other concerns which have become significantly important (Newman and Thornley, 2005, p.273). A major concern of any city is the advanced urban quality, which became part of the planning agenda in most cities of the world, from New York to Singapore. Higher urban quality certainly means an enhanced physical environment, yet also greater varieties and exciting cultural life. In a society of high networks, the place is 6 important. With concentration on urban quality, there are great needs for the management of space and strategic planning that play an important role in building a competitive urban quality, which is the same approach that Dubai followed when it introduced its strategic plan; it will be highlighted in chapter 3. In addition, Paris, for example, has always been ahead in emphasizing the quality of urban life, with its cultural activities, restaurants and attractive built environment. An amount of ₤2.5m has been spent on the project of converting the docks along the Seine to beach, with sand, umbrellas, loungers and games for children. The project was considered as the most dramatic part of the enhancement of the liveability of the Paris neighbourhood area. In addition, London's South bank and New York Hudson riverside are more examples of a tendency to create exciting areas of cultural opportunity and good environment (Newman and Thornley, 2005, p.274). Globalization and rapid urban growth have become a common feature of most countries. Globalization can be approached by a number of different processes that operate over different geographical areas and timescales. One example is the cultural industry which today is drawing more attention and has become significantly important for the economic vitality of most of the cities. As the importance of such industry increases, there will be implications for planning as it tries to hold such activity. In return, this will lead to dealing with other aspects of preserving good views, pollution, pedestrian streets and attractive neighbourhoods (Kratke, 2003). The preservation of cultural identity in Dubai has become a concern which will be discussed in chapter 4. Globalization involves different processes that need to be identified and their effect on cities explored. How the planning strategies treat 'world city spaces' of central areas and regional infrastructures as focal points, giving the rest of the city less attention, is obvious. The London plan, for example, has been criticized because of its central area bias and its global oriented economic activity. By recognizing the importance of the economic activity that the city plays on the national, local, and suburb centres, a more balanced plan would be reached. (Newman and Thornley, 2005, p.275). This is useful in studying Dubai urban growth, which will be discussed in chapter 3. 7 On the ground, there are five different types of challenges that major cities have to respond to: urban infrastructure, latest economic base, governability, quality of life and social integration; only with the ability to respond to these challenges can they on one hand be competitive, and on the other hand, assure the minimum level of wellbeing to their population that is essential to have a combination of democratic peaceful coexistence (Borja and Castells, 1997, p.93). The nature of economic activity and social life is being reformed in the 'globalizing era'. The national economies and societies are becoming interdependent extensively, though it is greatly in uneven way (Olds, 2001, p.17). The context of globalization and urban change across the world has been investigated. It has been found that, during the 1980s and early 1990s, explosions of analysis in the subject of globalization have been done. According to Giddens (1994, p.4) globalization means: "The process of the transformation of space and time through 'action at distance' " Globalization involves a great interaction among different social, economical and political institutes across a range of geographical scale; it is seen as a multidimensional phenomenon. On the other hand, the economical analysis of globalization has narrowed the multi-dimensional tendency; because globalization is shifting the relationship between consumers and producers, and breaking down the links between labourers and their families; furthermore, it is obscuring the lines between local people and the international attachment (Olds, 2001, p.19). All of the world economy sectors have been influenced by the latest developments in the international financial system. During the second half of the 1980s, property development booms spread throughout lands, housing and property markets across many countries, with the greatest spread in the United Kingdom, USA, Scandinavia, Australia and Japan.. The characteristics of these booms were widely similar. The world's economy was the longest, although the slowest, all were having considerable growth in their service sectors, liberalizing the financial system so that the cash was easy to come, consumer expenditure was increasing fast, and there was a general 8 optimism that the government approached this by permitting the free market (Coakley, 1994, p.671). This will be useful when investigating and analysing the real estate boom in Dubai in chapter 4. In early 1990, the international property markets faced the worse crisis of the century and the boom had ended. All types of property prices dropped throughout the major capitalist economies, producing negative impact on a large number of homeowners and a general failure on the commercial real state. The decline in the latter was mainly because the host companies in building materials, property and construction were going bankrupt or having some financial problems. The decline in prices affected all categories of the property market, plus the housing market, but the office/commercial market especially faced strong declines in prices. The collapse of the office properties affected all European cities, but very sharply in London and Stockholm: about 50% for each. Simultaneously, the current crisis expanded to the USA and Japan, both of which witnessed an extraordinary boom in late 1980 (Coakley, 1994, p.698). 2.2 Urbanization and real estate market in the world The 1980s construction boom and the subsequent collapse in 1990 presented a chance to follow the flow of capital into the built environment and to understand the function that this phenomenon (globalization) plays in the capitalist economy. Some theorists, mainly urban political economists, were more interested in the real state as the main target for the capital investment, and the degree to which the capital shifts away from the productive industrial activities to the real state investment (Coakley, 1994, p.715). Dubai followed the same path in the economic transformation that will be discussed in chapter 4. The success of the property market is certainly essential for many reasons. One of these important reasons is that although the interconnected relation between property and financial market is being increasingly integrated, there is a threat that the property crisis can act as a domino or contagion on the financial market (Coakley, 1994, p.698). 9 It is noted that, over the past 30 years, the main global economies have faced substantial shifts in their economic structure, with relative decline in the manufacturing field and growth in the services field. This is accompanied by changes mainly in the employment distribution. For example, in the USA between 1960 and 1991, non-agricultural employment rose from 62% to 78%, in the UK the work force grew from 48% to 56%, while in Japan it increased by more than sixfold over 21 years (Coakley, 1994, p.673). It is clearly seen that the property boom in the 1980s was about financial and professional services. This means a need for adequate places to work and building quality far higher than that needed for manufacturing. For instance, the offices have to be designed to higher standards, to provide better working conditions with new technology for the employers, and to reflect the advanced architectural design to the prestige of firms (Coakley, 1994, p.674). Building innovative buildings that reflect cotemporary best practice, scale, design and technology is considered as new formula for business success. This will be reflected in chapter 4, while discussing Dubai’s image and architectural influence. The 1980s was not a good period for the land use planning. Public policy encapsulated a number of features which are against the free market ideologies and the views of free marketeers of how the market should work. The control and evaluation of the changes in the land use is basically done in quantitative rather than profitability criteria. The planning authority objective is set out mainly by the political officials rather than in the marketplace. Later on, planning was viewed positively as the protector of the environment (Coakley, 1994, p.693). On the other hand, Dubai followed the free market strategy, as will be discussed next and later in chapter 4. 2.3 Globalization in the Middle-East Region In the past 30 years, Western Asia countries and especially the Middle East region have faced considerable economic, technological and political changes, which have 10 influenced the functions and the structure of their urban areas. The urban landscape has been shaped by three main factors: oil boom in 1970, large scale movement followed by the Gulf wars, and globalization. The rapid economic development that took place in most of the region countries over the past three decades was significantly accompanied by greater urbanization and population growth. Massive immigration of foreign labourers and expatriates to urban areas, particularly to Gulf countries occurred (UNESCWA, 1999). This will be discussed in detail in chapter 3 when studying Dubai’s urban growth. By studying the Middle East Region, it is observed that there is a sharp difference in terms of urban growth between the Arabian Peninsula and Mashriq countries (including Damascus, Beirut and Baghdad). Urbanization occurred in the Mashriq countries as a result of the slow movement of population from agriculture toward well-established industrialized areas. On the other hand, urbanization in the Gulf Cooperation Council countries (GCC) was sudden and rapid, and was generated from oil revenues. As a result, modern facilities, infrastructure, education and health services were created (UNEP, 2004). Urbanization has generated a flow of foreign workers and Nomadic communities to the new urban centres; therefore, the percentage of the population growth in Arabian Peninsula continued to be at different periods much higher than the growth in Mashriq countries (see figure 2.1). This comparison between the Arabian Peninsula and the Mashriq countries shows the context and circumstances in which Dubai was formed originally; this will be explained in more detail in the next chapter in the discussion about the background of Dubai's urbanization under economic transition. According to the UNDP (2001), the increase in urbanization in the region has continued to grow at a greater rate than the total population. In the Arabian Peninsula, all the countries have around 84% as an average level of urbanization, excluding Yemen with a level of 25%. Nearly all of the population of Bahrain (92.2%), Qatar (92.5%) and Kuwait (97.6%) occupy urban areas. The accumulation of inhabitants, their urban economic activities, travel manners, and their consumption patterns have a considerable impact on the environment in terms of waste discharges 11 and resource consumption (Doxiadis Associates, 1985). This will be useful in studying the impact of urbanization on Dubai in chapter 4. Figure 2.1 - Urban population growth in western area region Source: UNEP, 2004, Chapter two, p.1 A study conducted by the Arabian Gulf University in 2005 to identify land use variations in the urban and sub-urban areas focused on the Middle East region. The study was carried out by using remotely sensed data and geographic information systems technologies on two main case studies i.e. State of Qatar and the Kingdom of Saudi Arabia (KSA). The main purpose is to evaluate the degree of urbanization, and to examine its impact on land use categories in the Al-Ahsa oasis in Saudi Arabia, and in Doha, the capital city of Qatar. After interpreting the satellite imagery using specialized software, and maps having been produced, the study found that the coastal city of Doha and Al-Ahsa Oasis are suffering from urbanization encroachment and population growth. This study verified that, in Doha city, urbanization has mainly impacted on vacant regions, sediments and vegetation areas. Also, urbanization has had a negative impact on the coastline; this has been caused by land reclamation and dredging activities. On the other hand, in the Al-Ahsa oasis, urbanization has impacted mainly on sand areas, agricultural areas and planned areas (Belaid, 2005). Similar impacts faced Dubai and will be discussed in chapter 4. Consequently, as urban areas spread, coastal areas, forests, prime agricultural land and rural areas are changed into land for public infrastructure, housing, industry and 12 roads. Land transformation activities vary from small scale projects, e.g. filling and draining of wetlands, to large scale projects, e.g. major land fill and reclamation projects which expand shorelines into the sea. Such activities have taken place in Lebanon and the majority of the GCC countries. For instance, Dubai city has enlarged in size in 15 years by 92 km2 (Doxiadis Associates, 1985). Similarly, the kingdom of Bahrain enlarged in size in 23 years by 47.3 km2 (CSO, 1999), as a result of land reclamation alongside the coastal areas of the Persian Gulf to meet the urban growth needs. 2.4 International Context of Dubai According to Newman and Thornley (2005), Dubai has been able to develop into a regional hub of business and economy, with successful planned objectives of transforming to a city of importance within the international urban-economic structure. An important factor which energised the development of the city is the relationship between the local and global forces, mainly rooted within a specific geographical and historical context. The city development shows clearly the 'convergence-divergence' debates concerning the idea of cotemporary urban growth by means of demonstrating the logical association between globalisation forces (i.e. Cultural, economical and political) and localisation forces (i.e. environment, history, demography and ideology), in the process of urban environment production. In terms of global perspectives, however, the capitalist global system is mainly interested in the economic performance; it is more concerned with the urban agenda. Yet this objective is achieved differentially within a specific institutional and ideological context that differs from the entrepreneurship of Asia to the neo- liberalism of USA. As in the case that different cities embrace the economical importance of capitalism in various ways and various degrees, then some societies pursue unique development paths which reflect the interaction of local context and global forces (Smith, 2001). One of the main global forces that is working to support some sort of 'convergent urbanization' is the competitive international environment produced by economic 13 globalisation, which resulted in pushing city managers to work on ensuring that their city is an attractive location for investment. The competitive significance is obvious in city marketing, and the promotion strategies held by the majority of large motivated cities, city branding and imaging will be discussed in chapter 4. The impact of the physical development requires attracting multinational organizations and professional services. They contribute to the provision of residential and entertainment quarters to meet the need of free capital. The provision of mega projects in Dubai has been successful in representing some of the most spectacular projects in the modern world (Newman and Thornley, 2005). This will be discussed further in chapter 3. Tourism plays a vital role in the global economy as it is the main economic growth sector. The concept of property-based tourist-led growth has had a major impact on improving the economy and developing the physical structure of many cities globally. Dubai has become the primary tourist destination in the Gulf and Middle East region with its attractive ecosystem and 'sun-sea-sand'. Besides its retail, hotel and entertainment complexes, Dubai has significantly developed conference facilities, theme parks and trade centres in order to improve its international image as the main leisure tourist destination. Furthermore, global pressure places great emphasis on the provision of infrastructure, including rail transit systems, airport extensions and road projects, which are obviously in progress currently in Dubai (Newman and Thornley, 2005). Despite the global forces, the local context is able to calculate the impact and operation of global forces upon the various cities in various parts of the world. One of the principal factors is state political ideology. Whereas the city planning in the USA is carried out by many development agencies with little coordination with local authorities, in Western Europe, the government is centrally involved in the development and urban planning of the city (Smith, 2001). Dubai uses a hybrid model that combines both government control and economic liberalism, where the vision of the ruling family determines the urban development within a market capitalism environment that works on attracting foreign investment and minimising the restrictions to open the market. This strategy of state-led entrepreneurial ship to 14 control the urban growth has created a city plan that is a spatial term for economy strategy and also, a method for the provision of public infrastructure and services (Al-Sayazh, 1998, p.90). To have a better understanding of what is driving the unstoppable model of Dubai’s development, a clearer instructive comparison may be with Singapore. A leading figure – Lee Kuan Yew: president of Singapore - set the vision for Singapore to become one of the world's leading commercial hubs. Both of the presidents of Dubai and Singapore were aiming to transform their cities to major financial centres with world-class infrastructure to attract foreign organizations and companies, and in both cases it was recognized that the provision of services is indispensable to main international firms. Yet, the most important difference is that Lee Kuan Yew has controlled the system from the top-down, while Sheikh Mohammed Al Maktoom has determined a very strong pace in a different way. He always makes sure the money is available to kick-start very high risk projects, and then lets the market forces take care of the rest (Al-Sayazh, 1998, p.104). Therefore Dubai, as a model of development, is neither top-down - similar to Singapore - nor bottom-up - similar to the USA; the growth is generated from a combination of innovators and entrepreneurs. The model of Dubai functions well in the middle area: it acts as a catalyst by providing the support and development of new assets that are transferred to private management later (Mendoza, 2007). In terms of the expansion of 'anti-globalisation' and urban politics, the urban social movements have allowed some groups of citizens to apply their influence on the city plans, whereas in Dubai, the government centralised the structure and its economic importance provides the local people with limited potential for democratic participation in the city planning. The principal theme in carrying the developments only at the early stages is through a top-down process, instead of the grassroots process of decision making. However, this model cannot be applied in the USA and Western Europe because of its different political framework, its consequences in terms of urban development, and the rapid economics of the city are indubitable (Al- Sayazh, 1998, p.90). 15 Thus, Dubai represents a striking model of 'convergent urbanisation' as a result of the government reaction to global economic forces; yet at the same time it represents the power of culture, politics, local environment and history to mediate impact of global forces for the promotion of an urban form within a particular urban framework (Al- Sayazh, 1998, p.98). 2.5 Conclusion The chapter gives a background of the urbanization and globalization that have taken in the world and the Middle East Region. Global forces that have affected cities over the world have affected Dubai as well. The balance between global and local forces, with the aim of achieving a better urban quality, is the main objective of urbanization. Global economy plays a significant role in the urbanization of cities. The main global forces, including the capital and population (expatriates and labourers) flows are the main drivers of urban and economical growth. The world economy is greatly influenced by the international financial system. The property boom in the 1980s spread throughout many countries for the purpose of capital investment. Globally, major cities invest in real estate and the construction sector in order to be competitive. Major cities are facing many challenges to be competitive; these include capacity of the infrastructure, economic prosperity, quality of life and governability. Over the last 3 decades, the Middle East Region has faced similar urbanization under economic transformation. Dubai was very fast and successful in becoming a competitive city by investing in the property market. To maintain market prosperity and sustainable economic growth, it is essential to balance the local forces (e.g. environment) and the global forces (e.g. investors’ and developers’ capitals). Thus, it is essential to study the impact of the rapid urbanization and development on the urban environment and property market prosperity to address the problems and find solutions. The next chapter will discuss the Dubai urbanization over different periods of urban growth. 16 Chapter 3: Dubai Urbanization and Growth This chapter reviews Dubai's urbanization development over different periods of urban growth, to gain an understanding of how Dubai has transformed under economic transformation in the last two decades. The Dubai strategic Plan of 1993- 2012 will be highlighted in order to understand the role of the government in supporting the development strategy. Finally, an overview of the urban vision and property development will be discussed with the significant emergence of mega cities which played a vital role in the rapid development of Dubai. 3.1 Introduction to Dubai City The Emirate of Dubai, known also as Dubai city, is one of the seven emirates of the United Arab Emirates (UAE) that extends for about 72 kilometres along the Arabian Gulf coast. UAE is a federation of seven emirates: Abu Dhabi - the federal capital, Dubai, Sharjah, Umm al Quwain, Ajman, Ras Al-Khaimah and Fujairah (UAE Government, 2007). Dubai, with an area of 3,885 square kilometres, which is equal to 5% of the country's total area, is considered to be the second largest emirate in the UAE. Each emirate has been successful in contributing to the country's progress (UAE Ministry of Economy, 2007). Figure 3.1 – United Arab Emirates Map Source: http://www.lib.utexas.edu/maps/ 17 Figure 3.2 – United Arab Emirates Map Source: Wikimedia commons, http://upload.wikimedia.org/wikipedia Figure 3.3 – United Arab Emirates Location Map Source: World atlas, http://www.worldatlas.com/webimage/countrys/asia/ae.htm 18 3.2 Dubai Urban Development Fifty years ago, UAE comprised oasis, sand dunes, simple villages and fishermen, shepherds and seafarers. With its location in the desert with temperatures that can reach 130 degrees Fahrenheit and among the highest humidity in the earth, the challenge to change the living style in such a difficult environment is obvious (UAE Ministry of Economy, 2007). Yet, despite all that, Dubai, a tiny city, has carried out an impressive transformation over the last four decades, managing to move its economy from that of trading and fishing to finance, tourism, shipping and mass communications (UAE Ministry of Economy, 2007). Dubai has been able to create for itself an image associated with luxury: 12 million visitors in 2005, multi-billion dollar real estate projects, and one of the three most successful cities of the 1990s, as Jones Lang LaSalle has acknowledged Dubai (beside Dublin and Las Vegas), as measured by real state development and economic growth (Molari, 2004). In comparison to Western cities, where the conversion from pre-industrial to industrial then to post industrial position occurred over a period of two centuries, Dubai has been able to achieve similar conversion in only fifty years (Molari, 2004). Changes are remarkable in the economic, cultural and social characteristics of the city, and visible in the pace, scale and size of urban growth. The major economic transformation of Dubai city over half a century has been connected to major changes in its urban development pattern and population structure (UAE Government, 2007). Formation of Dubai Urbanization: Dubai faced different urban development through its history. In 1799, the city, which then was over 300 years old, began its urbanization process. During those days, a building called Al Fahidi Fort was considered to be the first attempt for the city towards urbanization (Al-Abed and Hellyer, 2007). One of the important periods in the urbanization history of Dubai was the British Colony period in the 19th century. A general peace agreement was signed with the British for the period of 1820 until 1833; during that time the current ruling family 19 – Al Maktoum – settled in and ruled Dubai. Accordingly, the urban development has been planned and directed according to the ruling family’s visions (Al-Abed and Hellyer, 2007). In 1892, an agreement was signed with the British, which determined their urban presence in Dubai until 1971, when the city gained its independence and began a new period of urban development. The oil discovery in 1966 has steadily accelerated Dubai's urban growth (Elsheshtawy, 2004, p.176). Four main phases of urban growth can be identified in Dubai: 3.2.1 Period from 1900–1955 It was a period of limited physical expansion and slow growth as a result of a minor increase in population and restricted economic growth. During that time, Dubai, with a population of 10,000, was divided into three districts (Elsheshtawy, 2004, p.178): Deira: considered as the main commercial centre, it included 1600 houses and 350 shops; the majority of its inhabitants are Arabs and Persians. Al Shindagha: considered as the main residential area and mainly the earlier residence of the ruling family, it consisted of 250 houses with no shops and with Arab residents only. Bur Dubai: considered the smallest of the settlement areas, it included 200 houses and 50 shops with the domination of Persians and Indian merchants. The majority of the people lived in huts called ‘Barasti’, built of palm fronds, and they lived all together as families with their relatives (extended families). In 1956 the first house was constructed using concrete blocks (Heard-Bey, 1982). 20 3.2.2 Period from 1956–1970 It was acknowledged during this period that an official institutional structure was needed to control future urban growth. The municipality of Dubai was established in 1957 to manage and coordinate the municipality's services under the guidance of the city council whose members were among the leading merchants. This period of compact growth period depended on the master plan of the 1960s that had been prepared by a British architect for the provision of a roads system, design of a new town centre and zoning of the town into variety of land uses. The strategy of the master plan was indicative of how strong the central control over the urban development was (Elsheshtawy, 2004, p.179). The land ownership during these times was based on two principles. Any plot of land that has been occupied in a settlement for a long period belongs to the residents. Elsewhere, lands were under the control of the ruler; he could sell it, lease it, allocate it to special uses for a specific a period of time, or give it to the municipality for community services. The title deeds for the plots developed in 1960 were traded freely, and if these plots had been required by the municipality, compensation would have been given to the landowner according to the market value. Moreover, the fact that the land outside the settlement areas could be disposed freely by the ruler gave magnificent central control over the urban development (Al-Abed and Hellyer, 2007). Figure 3.4 - Dubai in the 70's and 80's Source: www.skidubai.com 21 Figure 3.5 – Dubai Urbanisation 1973 Source: http://earthobservatory.nasa.gov/ 3.2.3 Period from 1971–1980 This was a planned suburban growth period. In 1971, with the availability of development capital and wider urban expansion, a new and innovative master plan was proposed. New provisions for a radial road network to the suburbs and ring roads around the city were made. Other main transport developments incorporated a tunnel beneath the creek and construction of two bridges, thus connecting city district (Bur Dubai and Deira) on both sides of the creek. The eastern area of the creek (Deira) was developed into the administrative centre and the major business banking area for the city, a main area for shipping and handling coastal activities, and the international airport. While on the other side of the creek, the World Trade Center landmark was located, and the main container harbour was developed beside the dry docks and the industrial areas (Al-Abed and Hellyer, 2007). During this period also, Port Rashid was planned, and a large residential area extending toward Jabel Ali (now called Jumeirah), while the southern parts of the city were set out for education, health and Leisure/recreation developments. 22 Moreover, the provision of the corridor along Sheikh Zayed Road toward Jabel Ali was of significant importance for the future structure of the modern city. This zone, known as 'New Dubai', is characterised as the new financial and commercial core of Dubai city (Gabriel, 1987). It was the end of the twentieth century that Dubai started to work on attracting the foreign investment, knowing how significant its natural harbour located on the Arabian Gulf is in linking the ancient trading routes between the Far East and the Far West, turning into a trading city (Al-Abed and Hellyer, 2007). Figure 3.6 – Dubai Urbanisation 1993 Source: http://earthobservatory.nasa.gov/ 23 3.2.4 Period from 1980–Present It is a rapid urban expansion period, in terms of both the scale and diversity of the development projects and the urban spread of the city that reached 710km 2 in 2007. The annual urban growth rate is about 3.9% and, according to the strategic plan, the built-up area will have been extended by a further 501 km2 by 2015 (Gabriel, 1987). Whereas the master plan of 1960 established the basis of the urban road network and the municipal services system, it was not designed for the subsequent explosive growth of the city and the economy. In the early 1990s, Dubai Urban Area Strategic Plan for 1993–2012 (see figure 3.8) was commissioned by the government to guide the physical and economical development of Dubai in the twenty first century (Elsheshtawy, 2004, p.181). Thus, Dubai was preparing for capital investment while the world was facing the boom crisis in the 1990s, as discussed earlier in chapter 2. Figure 3.7 – Dubai Urbanisation 2006 Source: http://earthobservatory.nasa.gov/ 24 The main challenges to be addressed in the new strategic plan were (UAE Ministry of Economy, 2007): To extend the existing infrastructure facilities and transportation network. To support the urban expansion by allocating extra planned lands to meet the current and future requirements for commercial, residential and industrial uses. To promote sustainable economic growth. To attract and support private and foreign investment by providing enough land supply, simpler administrative and planning procedure, adequate infrastructure, and by carrying out public funded feasibility studies mainly proposed major development to minimise the risk to private capitals. To encourage the coordination and cooperation between the government agencies and the private sector companies in undertaking 'mega projects' developments. To encourage the re-investment of the capital and profit of expatriates’ local enterprises. To develop a department within the planning framework capable of monitoring, reviewing and implementing the Structure Plan. To advise an environmental authority to operate within a strong market economy and integrate the interest and requirements of a great number of organizations and agencies. Recently, given that the economic diversification scheme has impacted upon Dubai's urban performance, a huge investment is occurring in the physical infrastructure of the city to meet the population growth and tourism demands. In early 2005, the population was estimated to be around 1.086 million and is likely to reach 3 million in 2020; consequently, a massive infrastructure provision has been prioritized in the city's urban development (UAE Ministry of Economy, 2007). 25 Figure 3.8 - Dubai Urban Area Structure Plan (1993–2015). Source: Dubai Municipality, http://www.gis.gov.ae/portal/page/portal/GIS_PORTAL/E- STORE/FreE-Maps/Structure%20Plan.pdf 26 3.3 Urban vision and property development Dubai, similar to several other contemporary cities, is running to establish its position in the competitive global economy, even though Dubai is also in a distinctive condition. By comparison with former Communist cities and older western industrial cities which are trying to find how to change their urban regeneration, Dubai is already involved in the process of urban regeneration. On the other hand, Dubai is similar to many other cities of the third world; it is facing many challenges, most significantly the provision of adequate infrastructure within the rapid urban growth and expansion; this problem is being addressed by Dubai from a relative economic strength position. Obviously, it has many opportunities, such as plenty of land resources, political stability, no sprawl settlements, no industrial dereliction, very strong flow of local and foreign capital investment, and it is moving with a clear development plan that intends to establish a city of regional and global importance for the twenty first century (Pacione, 2005). Property development and investment are the keystones of Dubai's development strategy. Both government and private sector are using this sector in a number of ways: As a method to enlarge and diversify the city economy by establishing new urban centres specialized in specific economical activity for instance tourism, IT, multi media and retailing. To create an image, landmark and space marketing, marked in iconic architectures, (e.g. Burj Al Arab - a seven star hotel in the shape of a sail), and the massive scale mega projects, (e.g. The Palm islands, Burj Dubai); these projects play a significant role as the national identity of the city and in attracting the investment capitals, all being means of raising the city's global profile. To expand the urban infrastructure network, including the international airport expansion, establishment of a new urban light rail system, in order to support the population growth and assist urban enlargement. 27 3.4 Emergence of Mega Cities Part of Dubai’s strategy to be the region’s hub for leisure, commerce and services and part of the planned urban growth, is the construction of a wide range of 'cities within the city' or so-called 'Mega Projects'. To support its strategy, the Dubai government established three major development companies: Nakheel, Emmar and Dubai Holdings. These companies were in charge of designing the master planned projects and ensuring that Dubai’s vision became a reality. Key projects among these are shown in figure 3.9 and discussed below: Figure 3.9 - Map of projects Source: http://www.marinebuzz.com 1. Internet City - completed One of the former mega projects, it is established to provide an environment and infrastructure that allows ICT enterprises to function locally, regionally and globally from the city of Dubai, with considerable competitive advantage, and is the base to many key international companies such as Oracle, Microsoft Figure 3.10– Internet City Source: www.projectdubai.com and Canon (FZ-LLC, 2008). 28 2. Media City - completed The city includes studios and the offices of the main media companies such as Reuters News Agency and CNN, and it is situated close to the Internet City (FZ-LLC, 2008). Figure 3.11– Media City Source: www.projectdubai.com 3. Festival City - completed One of the mega mixed-use developments that belongs to the private sector, it includes fifteen residential neighbourhoods with a world class atmosphere of leisure facilities, entertainment and shopping, and with an essential location beside the shoreline of the Figure 3.12– Festival City creek (FZ-LLC, 2008). Source: www.projectdubai.com 4. International City- completed A mixed-use development of about 800 hectares, it includes 21,000 residences to house 60,000 people in the form and design of 'national theme' districts in the architectural design and style of a mixture of countries such as England, Italy, Indonesia and China; it also includes 210 hectares of central business district, tourist facilities, hotels and international exhibition center (FZ-LLC, 2008). Figure 3.13– International City Source: www.projectdubai.com 29 5. Dubai International Financial Centre - completed A financial-free zone of about 450,000 m2, it offers a range of advantages including zero tax on profit and income, and no repatriation or restriction on capital/profit. It comprises a 50-storey headquarters blocks, and 14 other towers designated to become the financial core (FZ-LLC, 2008). Figure 3.14– Dubai International Financial Centre Source: www.projectdubai.com 6. Dubai Marina- completed It is a man-made marina of about 4.5 km and is strategically located on Dubai's Growth corridor. The project can house about 120,000 people in six cosmopolitan towers, restaurants, gardens and water leisure facilities Figure 3.15 – Dubai Marina (EMAAR, 2008). Source: www.projectdubai.com 7. Dubai-land Ski Dome- completed This is part of the Emirate Mall and is considered to be the third largest indoor ski-slope in the world. It measures 400 metres and uses 600 tonnes of real snow (FZ-LLC, 2008). Figure 3.16– Ski Dubai Source: www.Skidubai.com 30 8. The Palm Islands – under construction Three huge man-made residential islands in the shape of palm trees have been constructed by Al-Nakheel properties on the coast of Dubai (Palm Jumeirah, Palm Deira and Palm Jabal Ali). These are considered to be the largest artificial islands in the world. This massive project will increase the ground to water ratio, will increase the shoreline by 120 km and is attracting first-class hotels, luxury retail and exclusive leisure facilities (Al-Nakheel, 2008). Figure 3.17– The Palm Islands Source: www.uaeinteract.com 9. The World – under construction The World is an imaginary project which consists of 300 man-made islands in the shape of the world continents, and is being developed by Al-Nakheel properties. The project covers an area of 6 km in width and 9 km in length, and the transportation theme between the islands will be by marine transport only (Al-Nakheel, 2008). Figure 3.18 – The World Source: www.uaeinteract.com 31 10. Dubai Water Front – under construction This project will become the world's greatest waterfront project; the man-made islands are in a crescent shape that covers an area of 81 km2 divided into 10 districts, and will house more than 1.5 million people. The project, dominated by the artificial creek also called Arabian Canal which is about75 km, consists of 250 master-planned communities, a harbour, marina, residential and commercial facilities. The first phase of this massive project is Madinate Al Arab and Burj Dubai (also called Down Town Dubai) (Al-Nakheel, 2008). Figure 3.19 – The Palm Islands Source: www.uaeinteract.com 11. Dubai Mall – under construction This mall is designed to be the biggest shopping mall in the world and covers about 9 million ft2 of floor space; it is located near Burj Dubai, and is expected to attract about 35 million visitors in its first year of operation (EMAAR, 2008). Figure 3.20– Dubai Mall Source: www.uaeinteract.com 32 12. Burj Dubai – under construction This phenomenal tower of about 800m in height, also called 'Dubai Tower', will soon be the tallest building in the world. It consists of residential and leisure buildings, and is designed to be the centrepiece of the huge development area like 'Downtown Dubai' which is Phase One of the Dubai Water Front Project (Al-Nakheel, 2008). Figure 3.21 – Burj Dubai Source: www.uaeinteract.com 13. Madinat Al-Arab – under construction This project is actually the Phase One of the Dubai Water Front Project which will house a population of 80,000. It will offer 200 plots and includes public spaces, commercial spaces, retail facilities, resorts, and an integrated transport system (light rail and road) (Al-Nakheel, 2008). Figure 3.22– Madinat Al-Arab Source: www.uaeinteract.com 33 3.5 Conclusion This chapter gives a good background and understanding of how the financial prosperity, especially of the oil years, played a major role in transforming Dubai from a quiet village into a modern successful cosmopolitan city. In addition, the development plans, prepared by the government for the post-oil period, have been created to sustain this growth. The Strategic Plan for 2015 was an important step to prepare Dubai for the development growth, where it focused on the provision of infrastructure, economic diversification, and urban expansion to meet demands for commercial, residential, and recreational uses. The emergence of ''Mega cities'' was part of Dubai’s strategy and vision to be the hub of commerce, leisure and business. Although the physical and economic growth goals have been met, similar to most capitalist cities, there are consequences that will have impacts on the market prosperity and the built environment. The latter will be discussed in the next chapter. 34 Chapter 4: The Impact of Dubai's Rapid Development on the city The scale and speed of urbanization and development have resulted in a significant boom in the real estate and construction sectors. Property development has major influence not only on the economic prosperity of the country, but also consequences on the real estate market, environment and culture. This chapter will provide an overview of the real estate market in Dubai, its history, the main reasons and drivers for the flourishing of this sector and potentials in the property development. It will be followed by a discussion about the impact of the rapid growth and development on two main fields, the real estate market and the urban environment, that were mostly and critically impacted. 4.1 Real Estate market 4.1.1 About Real-Estate industry in Dubai The vision of Dubai has been set out by HH Sheikh Mohammed bin Rashid Al Maktoum, the Vice President and Prime Minister of the UAE, and Ruler of Dubai. He played a crucial role in directing the growth of the real estate sector. His vision of Dubai's city as both a tourism and trade hub has been backed up by government- owned real estate enterprises, the marketing of Dubai as a major tourism destination and business hub, and also major investment in services and infrastructure, i.e. roads, additional ports and airports (UAE Ministry of Economy, 2007). In May 2002, foreign property investment has sky-rocketed in Dubai, when a law was issued allowing foreign nationals to own properties in Dubai, with full right of residency being given to home owners by selected leading property development companies. Thereafter, Dubai became the Gulf's most sophisticated and largest construction market in the Middle East region; it was considered as the Manhattan of the Middle East. With no wonder, Dubai quickly became the main attraction for real estate investors and expatriates around the world. It was estimated that more than 100,000 British nationals have bought property within the city; this property boom has greatly helped to fuel Dubai's rapid economic and financial growth (KAB Real Estate, 2008). 35 188.8.131.52 Dubai's Strategic vision In drawing the vision of Dubai, there is a need to look at future revenues, taking into consideration resource limitations and perceptions about the place. It is located in the heart of the desert and its natural resource - oil - which is an important contributor to the economies of most Gulf countries is less than 5% of Dubai's GDP. It is predicted that oil will dry out in approximately 20 years (Middle East Monitor, 2007). Thus, diversifying Dubai's assets is an overwhelming need (see figure 4.2– GDP distribution 2006). This fact has been recognized in the government vision and clearly outlined in Dubai's 2015 Strategic Plan, which has a main goal to make Dubai a ''Global city'' and “globally leading Arab city” (Al- Abed and Hellyer, 2007) with the focus on tourism, trade, financial services, transport, real estate and construction as the key drivers to support its economy in the 2015 Strategic Plan. Figure 4.1 – Palm Jumeirah Source: Price WaterHouse Coopers, 2006, p.12 36 Figure 4.2– GDP Distribution 2006 Source: Ministry of Economy, 2006, p.71. United Arab Emirate yearbook 2008 http://uaeinteract.com/uaeint_misc/pdf_2008/English_2008/eyb5.pdf 37 What have supported the vision of Sheikh Mohammed are the high oil prices which have generated large funds to flow in the region. The increase in liquidity, together with continuous repatriation of funds from overseas into the region, has been conveyed into the real estate markets and stock markets in both private and public sectors. The government, with the support of a strong economy, investment in infrastructure, modifying regulation for easier foreign ownership and rapid population growth, has been able to set the real estate market to maintain a high growth curve (Price WaterHouse Coopers, 2006, p.13). Key Drivers for Dubai's surge in Real Estate Sector (Business Finance, 2005, p.36): 1. High oil prices and increased liquidity. 2. Government strategy to have economic diversification. 3. Significant economic growth. 4. Increasing the foreign direct investment. It was doubled to USD $18 billion in the period 2002-2005. 5. Repatriation and transfer of funds to Middle East region following the September 11th. Many analysts believe that the current boom in Arab real estate was the result of fund transfers after the 2001 bombing in USA; many Arab governments and individuals feared an American backlash, so they withdrew about 200 billion dollars from the US. Subsequently, many of these funds have been invested in the UK and Europe, with a significant part transferred to Gulf Countries. 6. Rapid population growth rates. It has been recorded as one of the fastest population growth rates in the world over the last five years. 7. Modifying ownership regulations to allow foreign ownerships in Dubai city. In addition, it is important to mention that the vision did not completely depend on "build it and they will come". It was also established on ensuring incentives for the attraction of major multinational companies and foreign direct investments. These incentives took different forms and shapes, the most important of these being (UAE Ministry of Economy 2007): 38 A well-organized and corruption-free bureaucracy in the public sector, which is very rare or almost a non-existent phenomenon generally in the Middle East area. A hyper-free market economy provides very low boundaries and restrictions on flow of funds and transactions. Tax-free and reduced tariffs that significantly attracted expatriates and western companies. Government strategy to support, directly or indirectly, many important economic projects to guarantee their success without loss. Foreign ownership in the free zone area has been allowed. High technology infrastructure has been established to sustain and support a prosperous e-government and electronic-based economic system. Visas processes are very easy and quick for visitors and businessmen. Security record has been maintained at a good level of zero major incidents, where heavy investment been made in the Emirate's security apparatus. The real estate market is booming in the Gulf Region. Developers are carrying out large scale mix-use developments on a regular basis all across the region, with a large number of them falling into what is called ''mega projects'' (Investments of over USD $500 million) (Price WaterHouse Coopers, 2006, p.13). Currently in the Gulf, almost two-thirds of the real estate ''mega projects'', some of which were listed earlier in chapter 3, are being undertaken in the UAE (see figure 4.3). This dynamic real estate activity in the UAE, which over the last five years has pumped more than USD $300 billion investment projects in the country in all levels: local, regional and international level. As a result, the UAE has been able to achieve the highest investment ranking of all the Gulf countries in real estate investments (Price WaterHouse Coopers, 2006, p.14). 39 In the last decade, Dubai's economy has recorded an average annual growth of approximately 10%, and since then has been accelerating recording 17% growth in 2004, 16% growth in 2005 and 20% growth in 2007 (Dubai Department of Economic Development, 2007). According to PWC - Price WaterHouse Coopers- (2006) this growth has been sustained, which is very impressive keeping in mind the fact that this growth was not driven mainly by high oil prices, since the oil sector contributes only 10% in the UAE's economy and less than 5% in Dubai's economy. This, along with a large population expansion (anticipated at approximately 6-7% per annum), demands the need for the supply of additional real estate. Figure 4.3– The distribution of Mega Project across the Gulf Cooperation Council countries. Source: Price WaterHouse Coopers, 2006, p.13 40 184.108.40.206 Dubai - the Forerunner in the Property Market To date, Dubai has been in the forefront of the cities, leading the way in the real estate boom, with construction industry and real estate services contributing to about 25% of Dubai's GDP and representing about 48% of total constructions in UAE (see table 4.1) (UAE MOE, 2007), while the capital city –Abu Dhabi and the other Gulf countries are following at a pace. Table 4.1 – GDP of the construction sector (AED Million) Source: UAE MOE, 2007, p.15 In addition, a significant relationship appears to exist between the financial market and the real estate market, figure 4.4 shows the statistical significance between the share prices of companies in the real estate and financial sectors. Figure 4.4– Shares of combined real estate and financial sector in Dubai's total GDP Source: UAE Ministry of Economy, 2007, p.21 41 The following section contains a discussion of the impact of the rapid development and investment on the real estate and construction sector, starting from the impact on the image of Dubai locally and internationally, moving to the impact on both the freehold and leasehold property markets. 4.1.2 The impact on Dubai Image in Property market Briefly listing the innovative Dubai projects (mega projects) which some of them have been discussed earlier in the previous chapter, these facts about Dubai's real estate activity have been found (Price WaterHouse Coopers, 2006, p.14): The world’s tallest tower (Burj Dubai) is being built in Dubai. The world’s largest shopping mall (Dubai Mall) is under construction. The world’s largest hospitality and leisure development has recently been started (Bawadi); it is expected to be completed in phases between 2010 and 2014. It is costing about USD $27 billion and at 10km will be longer than the Las Vegas strip. Also, it will contain the world’s largest hotel with 6,500 rooms. The longest in-door ski slope (in Emirate Mall) opened in Dubai in 2005 The world’s tallest dedicated hotel building (Burj Al Arab) - a landmark and an icon of Dubai’s skyline. The world’s first underwater hotel (Hydropolis Hotel). The largest man-made island (The Palm, The World), globally profiled and holding luxurious condominiums and yacht basins. What is surprising is that it has been promoted as the 8th wonder of the world, because it can been seen from the outer space, just like the Great Wall of China (Business Finance, 2005, p.36). About 17% of the world’s cranes are anticipated to be in Dubai now (considering a population of only 1.4 million, this percentage is a large figure). It may be clearly noted from the above that Dubai depends on landmarks and uniqueness in promoting the city to attract more business and investment and mainly draw the attention of tourists from around the globe. From observations, there are 42 always cautions and striking promotions – the ''biggest, tallest, riches, longest, unique'' which are all considered short-lived differentiators, especially when constructing destination images. It would be better to base it on the promise of more concrete and tangible things than on passing titles. Although the city of Dubai is recognized by a variety of images, not all these images enclose Dubai's image entirely. Dubai lacks a symbol or single logo to represent the city. Compared with other cities, such as New York, which is represented by the Statue of Liberty, the logo of '' I L♥ve NY'' and the campaign of the ''City that never sleeps'', or Singapore, which is represented by the Merlion, or Egypt, which is promoted by the pyramids, Dubai has not yet decided what its main image will be. Figure 4.5 - Burj Al Arab Hotel, Dubai Source: http://www.burj-al-arab.com Many efforts have been made for the marketing and branding of Dubai. An organization, known as DTCM (Dubai Tourism and Commerce Marketing), has been set out to take responsibility for marketing Dubai. This organization is expert in expressing the messages about the iconic Dubai constructions overseas. The sail shape of Burj Al Arab- seven star hotels- (figure 4.5) was designed to be recognized in 5 seconds (COLLIERS Int., 2006). Although the design has been so successful that the hotel became a symbol of Dubai in the same way as the Eiffel Tower stands 43 for Paris, there are yet many symbols emerging by developers competing to have such attractions. The image of city in any part of the world needs to be connected to an emotion. What any tourist will remember is the emotional experience from the destination. Until now, Dubai has been representing the desire of many expatriate population and foreigners investors living and working in the city, and since the people are usually the key drivers, they all want to own the vision and reflect their images; given the size of the multi-nationalities in the city this is a big challenge. Undeniably, Dubai was successful in presenting many images in many ways; e.g. lifestyle, shopping, tourism, business investment, real-estate, financial services, education and healthcare. Sheikh Mohammad Bin Rashid Al Maktoum, said in his historic speech: ''… It is common knowledge that it is far easier to build a financial capital than it is to build intellectual, psychological and moral capital. Building a road, or a bridge, may take a year or two, but building a person takes a lifetime. We live, today, in the ever changing era of knowledge, requiring continuous learning which does not end at a certain level, or by attaining a … certain expertise'' (Al-Abed and Hellyer, 2007, p.16) Dubai vision is clear, yet focus is needed; it presents variety of images which is confusing. Although Dubai has been able to focus on key elements, it needs to strengthen a few of these to be able to construct a destination with an image. Later on this chapter, the impact of socio-cultural changes that are taking place on architecture in Dubai will be discussed on the section about impact on the Urban Environment. 44 4.1.3 The impact on Real Estate Market This first part of this section will review the outlook of the property market and the demand outlook generated by the population growth, which will give a clear understanding of the main reasons for the impact on the freehold and leasehold markets. It will be followed be discussing the development consequences on both the freehold and leasehold markets. 220.127.116.11 The outlook of Dubai property market Real estate performed as a key driver of growth and has also been a robust and steady player in the last 5 years. With the decree to open up Dubai market for foreign freehold ownership, there has been an excess demand for residential and commercial building in relation to the supply. Huge demand for properties has been driven by international investors and developers, and in the last few years, owing to the limited supply and rising construction cost, rents and prices have increased significantly (Dubai Initiative, 2007, p.5). Figure 4.6 – Views from Dubai urbanization Source: KAB Real Estate, 2008, p.2 45 Demand Outlook: Population growth is the major driver for demand in a city like Dubai; it depends mainly on the natural increase in population and an influx of expatriates. Expatriates are the majority of the citizens; they represent about 90% of the total population, and they come to work (labourers and professionals) or to invest (see figure 4.7). The unemployment rate In UAE does not exceed 4% of the population (University of Michigan, 2002). Figure 4.7– Countries with the highest percentage of international migrants in total population, 1990 Source: University of Michigan, 2002 Dubai started as a small populated city of about 1,500 inhabitants in 1833, and has grown slowly till its population reached 59,000 in 1968. With the rapid urbanization in Dubai, a significant increase in the population occurred, recording 1.3 million in 2005, and the projected population is expected to reach 1.9 million in 2010 (see table 4.2). This strong population growth shows how sustainable is the current demand is for residential units (UAE Ministry of Economy, 2007). Table 4.2 – Population projection for Dubai (2007 – 2010) Source: Dubai statistics center, 2007, p. 46 18.104.22.168 Impact on Freehold Market According to Price WaterHouse Coopers (2008), the freehold market of Dubai has undergone many key developments since last year. The market is maturing; with buyers becoming more selective, property prices have become more stable, the secondary market is recording higher sales, and developers are constructing less on a speculative basis. Nevertheless, there is no sign of slackening in the demands for housing. Given the increase in the population growth rate, the estimated additional demand for housing units is between 40,000 to 50,000 units annually (p.46). The flow of expatriates is still continuing, the incomes level is rising, many projects are presenting off-plan sales; all these signs indicate that the real estate market is softening on a gradual basis rather than all at once, see figure 4.8. Figure 4.8- Summary of the Freehold Market development Source: EFG-Hermes, 2006, p.5 47 Many economists and analysts are expecting that the prices will probably start to fall in 2008, taking into account the actual proportion of forecasted supply that will come to the market and how high the demand is. Consequently, two scenarios have been conducted for the anticipated supply of the residential units. The first scenario indicates that a huge supply will start from 2008, taking into consideration that all announced projects will meet delivery schedules. For the second scenario, based on the assumption that there will be delays in deliveries which is - according to EFG- Hermes - more realistic, it is expected that only 50% of the supply will meet the schedule and enter the market. It assumes a major risk in the 2008 supply and the same delay will take place in delivery dates between 2009 and 2010. As a result, this scenario indicates that an average of 62,000 units will be added annually between 2009 and 2010 (EFG-Hermes, 2008). Therefore, and based on the market supply- demand forecast, an over supply in residential units is expected, starting from 2008 (see figure 4.9). Figure 4.9 - Expectation of Dubai property prices. Source: EFG-Hermes, 2006, p.33 48 It is observed that there are many factors contributing to the delay in the supply and also affecting the long term outlook of the property industry, which could result in developers and investor losing the interest to invest in Dubai in future. These factors include (see appendix B for details): 1. Limited number of contractors causes delay in supply and deliveries. 2. Limited supply of material and increase in construction cost. 3. The remaining land bank belongs to few people. 4. Possibility of mortgages payment failure. 5. Decline in economic condition. From all of the above we observe that, although there are pockets of weakness, the freehold market will mature, once the supply exceeds demand the market correction occurs. There is a risk of over supply in the coming years; however, there are other concerns which may affect this market and discourage further development in Dubai. Figure 4.10 – Map for the freehold ownership in Dubai Source: EFG-Hermes, 2006, p.12 49 The legal framework governing the ownership of properties in Dubai is a significant issue surrounding the prosperity of the freehold market. Until recently, there was no legal framework to control the property ownership for the city of Dubai. In March 2006, a freehold property law was issued; it helped in boosting the market by making ownership legal for foreigners but only in designated areas (see figure 4.10). The foreign buyers are now assured about registering their properties and preserving their title deeds in their own names. The registration of the title deed in the owner’s name is done through mega developers e.g. Emmar and Nakheel. Once the full payment has been made, the developer carries out the full procedure to issue a residency visa for the owner (COLLIERS Int., 2008). There are still a few legal concerns surrounding this law, however, mainly about the inheritance, maintenance of common properties, land ownership, mortgage registration and tenants’ rights in high-rise towers and apartments. These are presented in more detail in figure 4.11 (EFG-Hermes, 2008, p.12). Figure 4.11 – Dubai's Freehold law caveats Source: EFG-Hermes, 2006, p.13 Accordingly, by eliminating these grey areas in the legal framework, investor risk will be reduced and more confidence will be built in Dubai's property market. 50 22.214.171.124 Impact on Leasehold Market The leasehold market has also faced major development over the past few years. The rental rates became a hot issue, with residential units rents increased for about 40% in 2005 and by a further 30% in 2006 (see figure 4.12). The reason behind the rental rise is that demand is faster than supply. This increase in rental rate has impacts on the leasehold market: it causes market segmentation and divisions into three parts: 1. Low cost residential units 2. Residential units targeting middle-income people 3. Residential units targeting high-income people This market segmentation has led to a geographical segmentation; the city has been divided into two main segments. The first one is the Old Dubai area, including Deira, Rigga, Karama, Ghusais, Muraqqabat, and Satwa, these being most affordable and preferred residential areas for the low and middle income segments. The other segment is the New Dubai area, including Dubai Marina, Sheikh Zayed Road, Umm Suqueim and the new developments areas carried by the big developers, and these areas cater to the high income segments (EFG-Hermes, 2008, p.15). Figure 4.12 – Rise in rental rates Source: EFG-Hermes, 2006, p.14 There has been a dramatic increase in the demand for low cost units, owing to the continuous flow of expatriates, especially the blue collar workers (EFG-Hermes, 51 2008, p.15). The rents for these units in Old Dubai have increased by about 30% over a year (see figure 4.13). The middle income people mainly comprise workers living in Bur Dubai, Satwa and Ghusais. The shortage in low cost units has caused the increase in rents to be as high as those of the units targeting the middle income people (see figure 4.14). As a result, the middle income segment seems to be disappearing as the lower segment rents rise, and reducing the market division into two layers of rent rates, although it continues as three divisions (EFG-Hermes, 2008, p.16). In addition, the development in the leasehold market has impacted not only on the market in Dubai but also on the nearby emirates close to the Emirate of Dubai. The high rents in Old Dubai have pushed many people to look for housing in the nearby emirates of Sharjah and Ajman, which is less than one hour away from Dubai. Consequently, the new high demand in nearby emirates has pushed their rents up by about 55%. It is expected that the flow of workers moving out of Dubai will continue until rents rates gap between the emirates narrows (EFG-Hermes, 2008, p.16). Figure 4.13 – Low cost units rent increase Figure 4.14 –Lower rent Increase in middle income areas Source: EFG-Hermes, 2006, p.15 It is important to note that the differences in economic growth cause socio-spatial differences between high and low income people in the city (as what happened in Old Dubai and New Dubai), and probably social conflict. In Dubai the domination of up-market residential neighbourhood give huge areas of the urban spaces an exclusive character. On the other hand, it's not a government priority issue, to introduce an appropriate strategy for the management of social polarisation which may tax the powers of the city and urban planners. 52 Will Dubai's property bubble about to burst? We have noticed from what has been discussed earlier that the significant problem facing the property market in Dubai is supply and demand. The question which would arise here and by many people is will supply and demand cause the real estate bubble to burst? A key person in the financial sector said in an interview, " Yes there is a risk of the bubble bursting because the economy is still construction- / real estate-based and depends on the very vulnerable sustainability''. On the other hand, by reviewing some market reports and analysts opinions, it has been found that there was no significant increase in the rents over the last three months, indicating that the market is maturing. It is definitely good news for Dubai's residents, who are always frustrated by continuous rental increases stretching their wallets. However, the growth in the current rents is lower than for last year, but still the figures are extremely high. It seems that the recent slowdown in the US market has not affected the investment climate in Dubai, given that the latest inactivity in the property market does not reflect a slowdown. Therefore, indicators do not show that the bubble is going to burst, although it is possible. 53 4.2 The urban environment Over the last three decades, the unrivalled growth period has not come without a price tag. The rapid urbanization and development in Dubai have considerable impacts on the urban environment of the city itself and the country as a whole (Walters and Kadragic, 2006, p.85). The most critical issues influencing the built- environment include air pollution, the degradation of marine and coastal environments, land degradation and desertification (UNEP, 2004). 4.2.1 Air Pollution At present, the level of air pollution has reached dramatically high levels. United Arab Emirates has been ranked as one of the biggest per capita air polluters in the world (Walters and Kadragic, 2006, p.85). It has also been marked as one of the four nations in carbon dioxide generation (harmful pollutant) and in per capita fossil fuel consumption. These have resulted significantly from urbanization and motorization. Figure 4.15 – Traffic congestion in Dubai, 2008 Source: http://www.arabianbusiness.com The increase in the number of citizens and tourists using vehicles has contributed mainly to the increased of carbon emission in the air. Records show that Dubai has scored a 13% increase in carbon emission compared with 4.7% in Canada, 2.5% in Virginia and 2% in Michigan; these statistics were measured by using an On-road Vehicle Emission Measurement device. The scoring system was based in two variables: the number of cars during the time the test was taken and the level of emission from the cars. On both variable counts, the score of Dubai was seriously 54 high, comparing with that of developed countries, owing to the massive number of cars and cars emitting more pollution (Arabian Business, 2008). Further investigation and tests have been carried out by Dubai Municipality to define future pollution-reduction measures in the city. The resulting statistical data showed that the average annual increase in motor vehicles is about 12%. Dubai has around 541 vehicles per thousand people; that is higher than other developed countries e.g. New York (444), London (345) and Singapore (111). These data helped the official to address the percentage of vehicles exceeding the emission limit compared with other countries of the world. Accordingly, and with the addition of the fact that roadways are always clogged at peak hours owing to the accidents and traffic jams that regularly cause terrible congestion on the highways, the government suggested two solutions to mitigate these problems: first to reduce the number of journeys by car by introducing a new mass transit system such as the Dubai Metro project (see figure 4.16). Second, reduce the emission from the cars by banning cars that are more than 10 years old (Arabian Business, 2008). Figure 4.16 – Dubai Metro under construction, 2008 Source: http://www.dubaimetro.eu/view.htm 55 Figure 4.17 – Dubai Metro Rout Map, 2008 Source: http://www.dubaimetro.eu/view.htm Figure 4.18 – Dubai Metro Rout Map, 2008 Source: http://www.dubaimetro.eu/view.htm 56 Despite all these pollution problems, Dubai has been ranked surprisingly the 4th best in the New Environmental Report 2008 conducted by MasterCard Worldwide - Urbanization and Environmental Challenges in Asia/Pacific, Middle East and Africa (see Appendix C). Briefly, the report data were drawn from 21 key commerce centres in the world, based on three indicator groups, including indicators under government control, indicators not under government control and subject to climatic change, and indicators linked to natural environmental risks (Zawya Ltd, 2008). For more details see Appendix C. It has been noted from the analysis of this report that the cities with higher income have been capable of improving the environmental quality; as the Economic advisor to MasterCard Worldwide says, "The overall picture for Dubai is that by and large the city has done exceptionally well in creating a high quality environment within its urban setting, managing increasing population growth and a degree of unpredictable environmental impacts to ensure a good quality of life for residents" (Zawya Ltd, 2008). 4.2.2 Water scarcity Another environmental issue is the water level; Dubai has been considered to be one of the largest consumers in the world over the last 20 years following the rapid growth and construction activities in the city. Moreover, it is assumed by the governmental agencies that the water consumption level will increase by 44% by 2025. Ground water level has been falling by one meter annually in the past 30 years. UAE is ranked as the second largest producer in the world, after Saudi Arabia, of desalinated water, which is very expensive economically (Walters and Kadragic, 2006, p.85). 57 4.2.3 Demand on Natural Resources: The increase in the city urban growth, generated mainly by population growth and construction activities, has imposed great pressure on Dubai's infrastructure, public services and natural resources. Latest reports on environment which were issued by WWF (World Wildlife Fund) in 2003, illustrate the ecological footprint which weight human consumption of natural resources that are generated by biologically productive sea and land, and also the amount of resources required to absorb the waste generated (WWF, 2006). It shows that UAE is ranking number one with the highest ecological footprint (see figure 4.19). It is noted that the rapid growth of Dubai has put a significant burden on natural resources, and is also straining the capacity to provide public services such as energy, health care and education, sanitation and transportation. However, as seen in previous chapters, Dubai has high income and economical revenues which would support the government to provide the necessary services and infrastructure to maintain the quality of life and its wellbeing, but, perhaps owing to the speed and amount of growth, these have not been planned properly within the strategic master plan of the city. A key person in the study area, when interviewed about the authority role in implementing the new development into the strategic master plan, said, ''buildings control and procedures have been relinquished from Dubai municipality to 5 other area groups, which are government of Dubai subsidiary real estate offices, which are currently in their infancy and fairly inefficient and without over all ability to control or influence the infrastructure strategic plan, which is becoming a disaster in terms of sewage and waste disposal together with traffic and the inability to supply water and electricity'' (Author interview). 58 Figure 4.19 – Ecological footprint per person, by country, 2003 Source: WWF, The living planet report, 2006, p.14 59 4.2.4 Degradation of marine and coastal environments Poor water management is causing environmental damage in Dubai, and unregulated urban growth is also now causing extensive environmental damage. Recent evidence shows that Nakheel, the government-controlled development agency which is responsible for Dubai’s offshore developments, has carried projects that have negatively impacted on the environment. Many environmentalists and divers have complained that Nakheel's projects under construction ''The Palm and The World'' – artificial islands- (see figure 4.20) have destroyed the marine ecosystem, destroyed the nesting areas of endangered turtles and rerouted natural currents. The director of environment and protected areas in Dubai says '' the fish died because of construction work on the sea where they are building Palm Islands'' (Walters and Kadragic, 2006, p.85). Figure 4.20 - Artificial Island: Palm Jebel Ali, Palm Jumeirah, The World, and Palm Deira. Source:http://news.mongabay.com/2005/0823-tina_butler_dubai.html Obviously, the massive waterfront projects, The Palm and The World, form a highly noticeable impression on the landscape of Dubai, while, back down at sea level, the marine environment is suffering from critical damage caused by re-depositing of sand and dredging for the construction of these islands. The clear blue water of Dubai gulf has become harshly clouded with silt. The real estate boom and construction activity have destroyed the marine environment, buried oyster beds, 60 coral reefs and subterranean fields of sea grass, and endangered local marine species. Investigations have shown that two inches of sediment have covered the oyster beds, and beaches are gradually eroding owing to disruption of natural currents (Mongabay, 2007). When interviewing a member of the British Business Group in Dubai about the environmental issues, he said ''The world and palms and satellite islands have destroyed all the coral in a radius of 10 miles offshore and it will take many years to recover. In my opinion it is a pointless destruction which will become an embarrassment'' (Author interview). Nakheel Properties admit that its manmade archipelago projects have destroyed the reefs and changed the environment; at the same time they argue that the company is trying to reduce the impact by building artificial reefs after completion of the project, as mitigation to this problem. The company also employed a marine biologist to examine and rehabilitate the marine life. Recently, it has been observed that water channels between the fronds of the palm have become an ideal place for seagrass meadows and other species of seagrass, because the protection provided by the crescent (40 hectares of rocky reef) offered a suitable environment for the fauna and flora (Mongabay, 2007). The executive Chairman of Ports, Customs and Free Zone in Dubai Says '' The new habitat offered by our projects is more diverse than the previous ones found in the site; the fauna and flora are taking advantage of that'' (Author interview). Figure 4.21 – Corel Reefs in UAE Source: assets.panda.org 61 Figure 4.22 – Damaged Corel Reefs in UAE Figure 4.23– Reclamation for Palm Deira Source: assets.panda.org Source: assets.panda.org Figure 4.24 - The Palm Jumeirah main divisions Source: (nakheel.com) Figure 4.25 - Water channels in Palm Jumeirah Source: (nakheel.com) 62 In investigating the role of the government and local authority when studying these projects, one of the members of the British Business Group in Dubai was interviewed, and he said '' The planning authority is now firefighting and not planning in a strategic way; most of these projects haven't been studied with the master plan of the city'' (Author interview). It has been interpreted that the state environmental authorities in Dubai do not have enough staff and expertise to address the current and accumulating environmental issues. However, this situation is starting to change, with the emergence of environmental NGOs, who are promoting for national efforts to save the environment (Walters and Kadragic, 2006, p.85). Briefly, Dubai is depending on waterfront projects to promote for the city intensified costal and marine developments for various activities, including recreational and tourist facilities, and urbanization, associated with poor regulations and management, will cause degradation and loss of biodiversity in the marine habitat (Mongabay, 2007). 4.2.5 Influences on the city's architecture The economic prosperity, accompanied by the discovery of oil in the 1960s and the financial boom in the 1970s, encouraged the emergence of modern construction materials and technologies. It has transformed many aspects of the society which resulted in affecting the architecture and the built environment. The construction industry in recent years has introduced glass, steel, concrete and other modern materials. This has transformed Dubai into one of the most contradiction-laden cities. Although, the new image of Dubai, which mainly resulted from competition in real estate market, was discussed in the first part of chapter 4, it is better to discuss the impact of the Dubai image in terms of architectural style and design in this section since the cultural changes in architecture affect the built environment. The introduction and use of new building materials was done by local and foreign architects. With reference to chapter 3, in which examples of these projects are listed, we can see shiny glass towers and skyscrapers, reflecting the burning sun, and a 63 massive manmade island changing the urban landscape of Dubai city. Because of the hot climate in Dubai, air-conditioning is essential in all buildings; therefore cooling these vast numbers of glass buildings is energy-consuming, beside the large areas of lawn consuming large amounts of water in irrigation. All these will affect the coming generation and the sustainability of development in terms of energy and resources consumption. Figure 4.26 – Different view of modern Dubai Source: www.ilovedubai.com In addition, and despite the impressive urban growth, some complain that the city has become soulless with every one in transit and no identity, while others prefer the modern approach and consider it a step to modernity and development. On the other hand, few consider the vernacular architecture as images of the poor and unwanted past, while many praise it and consider it as an image of identity. Nevertheless, there are some projects which reflect the culture of Dubai, such as the sail-shaped Burj Al- Arab and the palm-shaped island of Jumairah - projects which are symbols of Dubai culture and heritage. In addition, the Bastakiya village – a traditional old village along Dubai Creek - has been restored as the traditional village of Dubai. Yet, the government of Dubai addressed the fear of losing the identity of the city, and is focusing on promoting the indigenous art, culture and architecture. This has been reflected in some new projects have been designed with the traditional architecture style of the city, such as the Mina Al Salam Hotel (see figure 4.27) 64 Figure 4.27 - Al Bastakiya Village Source: www.ilovedubai.com Generally, the new modern architecture and technology in Dubai are considered to be an imitation of western architecture (as is the case in most third world countries) to satisfy the desire of making an image and profit. This viewpoint about the issue of identity and heritage is essential, because its impact will be on the architecture and the built environment of not only the living generation but also of future generations. Figure 4.28 – Modern designs and traditional designs, Mina Al Salam Hotel on the right. Source: www.ilovedubai.com In brief, architecture must represent all aspects of the city's past, present and future, and there should be cultural break between the old and new architecture. The next challenge to Dubai is to represent architecture that respects the identity of the place, people and the environment on one hand and new materials and designs on the other hand. 65 4.3 Conclusion This chapter indicates that the today's real estate market in Dubai was the product of its ruler's ambitions to make Dubai the hub of commerce, business and tourism. This ambitious and vision of Shaikh Mohammed has speeded up and enlarged the scale of urbanization and development in the city. It has been found that ongoing rapid development, including massive construction activities and waterfront projects, has not only increased the economic prosperity of the city, but also has extensive impact on the real estate market, resulting in high selling and renting prices, and threats of losing foreign interest in future investment as a consequence of lack of sufficient regulations. In addition, it resulted in the degradation of urban environment, which includes high air pollution, scarcity of water, pressure on natural resources and infrastructure, damage to the coastal and marine environment and loss of city's identity and culture. By looking to Dubai's future vision and current economic growth, it is recognized that the rapid, planned/unplanned urbanization and the natural rapid population growth will continue to increase. Consequently, the negative environmental impacts will continue as well. Therefore, the role of the government is essential in regulating coastal developments, besides raising the awareness of the investors and developers about environmental issues, cultural identity and marine habitat management. 66 Chapter 5: Conclusion This dissertation was undertaken to study Dubai's rapid development and its impact on the property industry and the urban environment. Two key questions have been constructed to reach the aim; the first question is: ''what has made Dubai's urbanization and - especially its real estate - development possible?'', and the second question is ''What are the consequences of this rapid development in relation to Dubai's property market and urban environment?". Therefore, this final chapter aims to provide an overview of the answers to these questions. To answer the first question, an investigation was made to study the main strategy and drivers which made the real estate and construction boom possible. The financial prosperity of the oil years played a major role in transforming Dubai from a coastal trading village into a modern cosmopolitan city. HH Sheikh Mohammed bin Rashid Al Maktoum – the ruler of Dubai- is considered responsible for Dubai's growth and development. His vision to establish Dubai as the hub of commerce, business and tourism has played a significant role in directing the growth and development in many sectors, especially the real estate and construction sectors, as discussed in chapter 3. Dubai’s Strategic Plan 2015 was introduced by the government, with its main goal to make Dubai a ''Global city'' and “globally leading Arab city”. It has made Sheikh Mohammed’s vision a reality. The master plan focused on tourism, trade, financial services, transport, real estate and construction as the key drivers to support its economy. In addition, the decision made by Sheikh Mohammed in 2002 to open the market for freehold property rights, enabling the non-UAE nationals to own properties within the master planned development, has sky-rocketed the foreign property investment in the city, as indicated in chapter 4. This has attracted many local and multinational companies, as well as expatriates, to invest and work in Dubai. Thereafter, Dubai became the Gulf's most sophisticated and largest construction market in the Middle East region. 67 As discussed in chapter 4, the key drivers to the real estate and construction boom include mainly high oil prices, increased liquidity, significant economic growth, economic diversification, repatriation and transfer of funds from USA to Middle East region following the terrorism activities, increase in population growth, and the introduction of new property regulations allowing foreign ownership. What has supported the property market is that the government ensured an attractive market by having a well-organized bureaucracy in the public sector, a hyper-free market economy with no restriction and boundaries on funds, high technology infrastructure, easy and fast visas processes, and political stability and security. The real estate industry currently plays a vital role in the economic prosperity of Dubai and UAE as a whole, with construction industry and real estate services contributing to about 25% of Dubai's GDP. On the other hand, this rapid growth has impacts on the city of Dubai, which will lead to answering the second key question of this research. The impacts of Dubai's rapid development will be focused on two of the most impacted fields: the real estate industry and the urban environment. The impacts on the real estate industry have been studied from three aspects of the city, including the city image, the freehold market and the leasehold market. As discussed in chapter 4, the real estate and construction boom have been marketed by the emergence of ''mega projects'', accompanied by a striking promotion and cautions about the ''biggest, tallest, and so on''. Over the last 5 years, Dubai has shown many images, representing the desire of many of the expatriate population and foreigners living and working in the city. Still, Dubai lacks a single image or symbol representing the city. The government realized this, and assigned the marketing job to DTCM organization to promote for Dubai. They were successful in promoting the sail-shaped Burj Al-Arab Hotel as a symbol for Dubai, but there are many symbols emerging yearly by competing investors to ‘own’ the attraction. The variety of images Dubai is presenting is successful in reflecting Dubai’s lifestyle, tourism, finance and real estate. Yet, focus is needed to be able to construct a destination with an image. 68 The impact on the freehold and leasehold markets started when a decree was issued to open the market to freehold property rights to foreigners. The population growth increased, Dubai attracted investors, international buyers were looking for a second home market, expatriates and labourers were looking for jobs and a better life. As a result, an excess demand for residential and commercial building occurred in relation to the supply. Over the last few years, owing to the limited supply and rising construction cost, rents and selling prices have significantly increased. The limited supply is attributed to delays in delivering the units, which have been caused by many factors, such as limited number of contractors, limited supply of material, etc., as indicated in chapter 4. Consequently, this will affect the freehold market in the long term, which would result in the loss of future interest by developers to invest in Dubai. In addition, another issue that could threaten the prosperity of the freehold market is the legal framework governing the ownership. Although a freehold property law has been issued, ensuring that the properties are registered in the buyers’ own names, there are still gaps such as inheritance, land ownership, etc. which need to be addressed to reduce investors’ risk. On the other hand, the significant increase in rental rates has impacted on the leasehold market causing market segmentation and geographical divisions. As indicated in chapter 4, the city has been divided into two parts: Old Dubai, targeting the low- and middle-income people, and New Dubai, targeting high-income people. This resulted in socio-economic problems as discussed in chapter 2. In studying the impact of the rapid development on the urban environment, it has been found that, as a consequence of the speed and scale of development, this has resulted in significant degradation of the urban environment, leading to effects such as high air pollution, scarcity of water, pressure on natural resources and infrastructure, damage to the coastal and marine environment and loss of city's identity and culture. As discussed in chapter 4, Dubai has been ranked as one of the biggest per capita air polluters in the world. The increase in the population’s use of vehicles has contributed to the increase of carbon emissions into the air, as well as accidents and 69 terrible congestion on highways. The increase in population and construction activities has resulted in Dubai now being considered as the largest water consumer in the world over the last 20 years, which makes it the second largest producer of desalinated water. Also, it is ranking number one with the highest ecological footprint, which indicates the great pressure on natural resources, energy and infrastructure. The most critical impact is on the marine habitat: extensive damage to coral reefs and endangered species has occurred following construction work in the waterfront projects, such as The Palm and The World, carried out by Nakheel Company. The loss of identity is another issue threatening Dubai; urbanization has introduced new construction materials and technologies, transforming Dubai into one of the most contradiction-laden cities in the world. Recommendations The key to the real estate market success in the Dubai will be: Continuing the open market strategy to foreign ownership. Introducing clearly defined real estate regulations, policies and entitlement to fill the gaps in the current law, and to insure maintaining future interest in Dubai market. Providing more balanced alternatives among all real estate categories (i.e. to propose projects targeting high-income, middle-income and low-income people). Maintaining an attractive tax free environment and reduced tariffs. Enabling the support of infrastructure and public services to keep pace with property developments. Regulating coastal developments through the government by introducing a monitory body. Raising the awareness of the developers about environmental issues, cultural identity and marine habitat management. 70 Mitigating the impact of rapid development on the built environment by introducing a national sustainable development plan and a national environmental plan. In brief, until now urban growth and development is not yet well managed as is the case in most developing cities. Dubai's current economical growth and future vision indicate that the rapid urbanization and growth will continue. 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The positive is that it has created a vibrant society with tremendous opportunity for all. Negative the growth has vastly exceeded infrastructure and has decimated local culture and heritage which can never be replaced i.e. 100 years growth in 7 years. 2. What are in your opinion the strengths and weaknesses of rapid urban growth using real state sector to achieve it? High risk with inflation at 20%+ and a false unsustainable economy. 3. What are the procedure and process of acquiring the building permits for the mega projects in Dubai city especially with the enormous number of projects and developments? Are there specialized local authority dealing with that? The Dubai municipality has relinquished its building control and procedures to 5 other area groups which are government of Dubai subsidiary real estate offices which are currently in their infancy and fairly inefficient and without over all ability to control or influence the infrastructure strategic plan which is becoming a disaster in terms of sewage and waste disposal together with traffic and the inability to supply water and electricity. 4. What is the role of the government in furthering or hindering the growth of Dubai? Their ability to get investment in the light of negative press together with the inability to control inflation ***** greed for growth without the concern for maintaining economic and community stability. 5. What is the role of the Planning authority in furthering or hindering the growth of Dubai? The planning authority is now fire-fighting and not planning in a strategic way. 76 6. What do you think are the main challenges that face Dubai nowadays in the real estate sector and urban growth? Avoiding major bankruptcies in the inevitable over supply which may cause a crash in properties that have escalated 100% in 2 years. 7. What are the main factors supporting and distinguishing UAE from other Gulf Countries, and until when it would remain as the hub given the strong competitions rising in the region? The GCC through political instability from 1990 has caused investors and major companies to centralize in the most stable being Dubai and that has brought with it the fertilization for investment included in which is massive Russian and Iranian funds. 8. Some analysts and economists expect a risk of the bubble bursting. Do you agree or not, why? Yes because the economy is still construction / real estate based and depends on the very vulnerable sustainability. - If Dubai bubble occurred, what do you think are the main challenges facing Dubai development and how do you think Dubai is capable to face future risks? - It is the investors not the government that face the risk the latter in the recent past having diversified to overseas investments in a very shrewd manoeuvre. Mega Projects: 9. How realistic do you consider the need and necessity for all these mega projects? We see Jumairah Beach Residence, a lot of Business clusters being developed. How has the need for these projects been identified? A good idea at the time and in the most part badly considered and do you realize that a lot of the projects being announced never happen and that the number that do are not exactly as advertised. 10. How are usually theses mega projects been implemented in the master plan of the city, has it been studied thoroughly with the government and local authority? NO STUDY AND NOT GIVEN MORE THAN ****IT LOOKS GOOD 11. What are, in your opinion, the projects with most dramatic impact on Dubai's future image and urban fabric? 77 The demolition of SATWA which is a major central area of Dubai is destroying a community and the ability of the office and shop workers to be able to afford to live in Dubai and in it-self is destructive to stabilized growth. 12. The Arabian Canal is an interesting project, which has been stated to be the biggest project in the world. What impact do you think those projects may have on the environment (reclamation, coral reefs)? The world and palms and satellite islands have destroyed all coral in a radius of 10 miles offshore and will take many years to recover. In my opinion it is a pointless destruction which will become an embarrassment. Vision about Dubai Future: 13. UAE has been ranked No. 37 globally on the Davos World Competitiveness Index 2007/2008, and first on the Arab World Competitiveness Index. What is your opinion about Dubai city future international positioning within global economy, will it improve? No it is my opinion that Dubai is currently at the peak of its development 14. What are the main factors to enhance the drivers of growth and development for Dubai in the Arab world and globally? The ability to maintain its reputation of return on investment being ahead of the world and above 8 to 10 %. 15. In your opinion, what are going to be the future challenges of the real estate sector in Dubai? The ability to sell by not exceeding demand to a point that properties remain sellable without loss to the investor. Finally, are there any other significant issues that you like to talk about regarding Dubai rapid development? That Dubai does not loose sight of its allure to the world of being a quality destination of immense cultural heritage and affordable cost of living and being value for money. 78 Appendix B – Main Delay factors in Dubai supply market There are main factors contributing to the delay in the supply and also affecting the long term outlook of the property industry. These could result in developers and investor losing the interest to invest in Dubai in future. These factors include: 1. Limited number of contractors causes delay in supply and deliveries There is a limited number of well-qualified contractors, local or foreign, working in Dubai. Their tight delivery schedules and the shortage in skilled and unskilled labour have pushed the delivery of projects of 2007 back to 2008. Thus, the delay in deliveries and the failure of developers to find reliable contractors to carry out the construction work may cause developers and investors to be less enthusiastic about commencing future projects. 2. Limited supply of material and increase in construction cost Given the high level of real estate activity, the construction costs have increased over the last two years by about 15%, and also there is a shortage of raw construction material e.g. steel, sand and cement; all these has have caused delays in construction and deliveries. 3. The remaining land bank belongs to few people The property market in Dubai has become more fragmented and much large developers have sold their lands to other private developers, yet, over 50% of the land is still in the hands of large scale developers such as Nakheel, Emmar and Dubai Properties. The massive work of these companies, and the large scale, duration and investment of their projects mean they will have fewer resources to start new developments. 4. Possibility of mortgages payment failure Defaults on mortgage payments have occurred because the rental yield exceeded the mortgage rates. When the property prices go down and rental yields fall, mortgage companies will still be dangerously exposed. With cash flow mismanagement, the investors will not be able to make their payments. 5. Decline in economic condition Any slowdown in the economy will affect business activity and mainly construction work, because this would tend to reduce the number of expatriates flowing into the country. This in turn would cause lower demand for residential units. 79 Appendix C- Environmental Report 2008 conducted by MasterCard Worldwide Urbanization and Environmental Challenges in Asia/Pacific, Middle East and Africa Table 1: Combined Ranking among commerce centres in the world 80 Looking at the first group of indicators considered to be under government control, such as water availability, water potability and waste removal, one can see that Dubai has been listed fifth (see Table 3). This indicates the existence of good standards of water cleanliness and access, a good sewage system and low levels of diseases and air pollution, although Dubai has been marked as one of the worst in traffic pollution. On the other hand, Dubai has a lower score – 14th - in the second group of indicators (see Table 5), that is subject to climate change which includes water scarcity, the rise of the sea level and hurricanes. In this group, the geographical location of Dubai, it being a coastal city, affected the city ranking (Zawya Ltd, 2008). Group 1- Indicators under Government Control Table 2: Weights of Indicators in Dimension 1 Table 3: Rankings in Dimension 1 81 Dimension 2- Indicators subject to Climate Change Table 4: Weights of Indicators in Dimension 2 Table 5: Rankings in dimension 2 82
"Development of Dubai"