Saturday, January 10, 2009
Dubai: First Impressions
On Wednesday 1/8/09 I took the London underground back to the airport and boarded a plane for Dubai at 9pm. I landed in Dubai 1/9/09 at 7:40am and spent the day touring the southern side of the city, went to the gym, napped and went to a handful of hotel bars/nightclubs.
Two of my most interesting observations are that the city is far more dense than I expected, but only about half occupied in places (at least near the Dubai Marina). Secondly, many very nice buildings/hotels have been "out-luxuried" in five years or less. In other words, what was a luxury product five years ago is now just an average to below average hotel due to the constant architectural one-ups-manship here. This begs the question, "what do you do to differentiate your luxury product in an environment like this?" Apparenly the answer here has been to just build taller, more fancy buildings with increasingly nicer finishes, but that only creates an exciting game of real estate hot potato. People keep trading properties back and forth until there's a collapse in perceived value, the last man holding title gets sunk.
When I asked my friends on twitter and facebook I got several responses. One idea to "create the illusion of higher quality by being the most expensive." sounds to me like the above solution. Someone else suggested that the investor "start targeting middle class and sell the product in a way that influences and supports them in feeling productive." in an effort to capture both the mid and high end markets.
In the Dubai market the one exception to this policy of participation in the iconic building arms race is a company called Limitless, which is focused on creating the next destination neighborhood instead of iconic buildings. The problem of course with iconic buildings is that they can be eclipsed, but if you create an iconic district, it retains it's charm despite the lavishness of the buildings. Think of your favorite urban neighborhoods, SoHo, Wicker Park, Rittenhouse Square, the French Quarter, the Pearl District, etc. If someone builds an iconic building in a different part of town does it affect the quality of the life or the property values in your favorite area? Not usually... because a neighborhood is about people. People who live and die, but en mass have the ability to be timeless.