Dubai's "build and they will come" model is in a state of flux, rather than broken, as the emirate suffers growing pains in its evolution from emerging economy to global business hub, one of its key developers said.
Santhosh Joseph, president of Dubai Pearl FZ LLC, the developer of the recently revived $4 billion Pearl project said Dubai's property sector weakness had been exaggerated by those who had little or no first-hand insight into the market.
"My firm belief is that the same people who are talking down Dubai will be among the first people to come back," he told Reuters in an interview on the sidelines of the MIPIM real estate trade fair at Cannes.
"I believe that by 2012, the troubles of 2009 will be forgotten. It is a young city, and like a young human being, it must suffer growing pains," he said. In less than 60 years, Dubai has evolved from barren desert into one of the world's most-developed urban landscapes, studded with one mega-project after another, including vast skyscrapers and man-made islands visible from outer space.
However, many properties have become empty trophies for their developers as the speculative building model stimulated oversupply of high-end offices, hotels and homes.
Despite this overhang, Joseph's team restarted construction at the 20 million square feet Dubai Pearl project earlier this month, reflecting confidence in Dubai's post-crisis market.
"For me, that model has worked for the last 20, 30, 40 years, why should it stop working now?," he said.
"By 2012 and 2013, I expect the majority of Dubai's commercial space to be absorbed. In residential, there is supply of between 16,000-18,000 apartments per year for the next three to four years but the annual population growth is almost 10 times the supply of apartments," Joseph said.
The Pearl developer, which is backed by a consortium of investors led by Abu Dhabi's Al Fahim Group, has tweaked old designs to create a more environmentally-sensitive project, which it said marked a "new era" in the evolution of Dubai.
Almost half of the site area will be public open space and the developer is targeting LEED Gold certification -- one of the world's hallmarks of sustainable building -- in its use of energy conservation and waste disposal technology.
Joseph is not worried that scores of Western corporate occupiers will not sign up to appreciate these efforts, after quitting plans to expand into Dubai after its economy nosedived.
"That is another misconception. We are not simply building for (Westerners) but also for Asians and the rest of the Arab world. I don't think more than 15 per cent of the property in Dubai is either bought or occupied by the Western world," he said.
Those companies confident enough to make a move into Dubai today would reap the benefits of a depressed rental market, which has slashed the costs of business start-ups, Joseph said.
"Now we have a sustainable rental market for companies coming in. Rents had gone beyond $200-250 per square foot in some places at the peak. Now it is around $50-60 per square foot which is far more affordable and will help Dubai a lot."
Dubai Pearl has already pre-sold 500 residences at the first phase of the scheme, accounting for 95 per cent of the initial release of units.
A second tranche of units is due to be marketed at a series of roadshows in Beijing, Shanghai and Hong Kong in coming weeks but Joseph has no plans to market commercial space before 2013.
This first phase of building is costing $2.5 billion, and is already fully funded, mostly by equity and completed pre-sales.
The complete project is due for delivery in 2013, a year Joseph believes will see Dubai back firmly on the front-foot.
"Of course the global meltdown has affected Dubai but there are no Dubai-centric problems as we see it. Dubai was the last to crash and I believe it will be the first one to truly recover to pre-crisis levels," he said.