The current global economic crisis has hit the rapid development in Dubai. In recent years, the Gulf state became a magnet for property investors attracted by the prospect of substantial returns, and has been marketed as a luxury shopping and holiday destination. Now the boom appears to be slowing down, as Government-owned developer Nakheel, one of Dubai’s largest employers, reduces its workforce by 500.
Dubai has become renowned for its high-status developments such as the artificial islands in the shape of palm-trees, one of developer Nakheels projects
, but is clearly not immune to the economic slowdown. Nakheel is now delaying work on projects including a hotel on Palm Jumeirah which it is building with US tycoon Donald Trump, and two other island chains, the Waterfront and Palm Jebel Ali.
Only recently, the company marked the opening of the Atlantis hotel on Palm Jumeirah
with a massive party, attended by an array of celebrities, at a reported cost of £20 million. The celebrations, accompanied by an extraordinary fireworks display, were astutely described by guest Sir Richard Branson as "the last party of the decade".
Along with the opening of its new hotel, Nakheel has also taken delivery of the former cruise ship Queen Elizabeth 2, destined for a new life as a floating hotel. Such grand events may suggest that its past successes continue, but a spokesman admitted that it had had to make alterations to its short-term plans in response to current economic conditions.
The company blamed its decision to reduce staff on slow sales due to investors taking a long-term view rather than looking for the rapid gains seen in recent years, and described the redundancies as "a necessity dictated by operational requirements". It is not the only developer in Dubai to reduce staffing levels, although it has made greater reductions than other companies. Many foreign workers who came to work on such projects now face having to return home, although Nakheel promised them support packages allowing for social, financial, and professional welfare."
Since it opened up the market to foreign buyers in 2002, Dubai has become a popular destination for real estate speculators in search of rapid gains. Last year, 800,000 British tourists visited the emirate, on target to meet plans to attract 15m tourists to the city-state each year and create a “world capital for the 21st century” Sheikh Mohammed bin Rashid al-Maktoum, its ruler, has created a network of tax incentives and property concessions to prompt the world’s mega-corporations to set up shop there.
"Nakheel’s fortunes are seen as closely connected with those of the emirate and these job cuts are an indisputable sign of the times, said Chintan Mahida, property expert at Nubricks.com, the Dubai property bubble has by no means burst, but it is certainly not continuing to expand and the construction industry is having to take steps to weather the global economic storm.