The announcement of The Lagoons project is another landmark in the ongoing Dubai property boom, where the emphasis has now shifted from residential to commercial real estate. With a total development value of $18 billion this is Dubai's biggest single project to date, and tops anything else launched in the Gulf.
The Dubai Creek was the first district of the city to have its land value upgraded by infrastructure works by the late Sheikh Rashid, founder of modern Dubai and father of the present ruler Sheikh Mohammed. It is therefore fitting that the biggest real estate development of the modern era should again be on the banks of the Dubai Creek.
At 70 million square feet The Lagoons is the largest project of the 21st century so far. It will comprise seven landscaped islands, linked by bridges, with residential buildings, shopping centres, office buildings and marinas. There will also be a central business district, five star hotels, an opera house, theatre, a planetarium, art gallery and a museum.
All the property at The Lagoons will be sold freehold to all nationalities, and half will be sold to third party developers and the balance will be developed by Sama Dubai, the realty arm of Dubai Holding, which is 100% owned by the Dubai Government.
Office market study
This week Colliers International published an Office Market Overview for the Gulf region which highlighted a doubling of Dubai office rentals since 2002, and the fact that 40% of current tenants were tentatively looking to increase their office space. The conclusion was that the office market would remain tight until mid-2007.
However, Colliers also noted that the present 14 million square feet of office space in Dubai will more than double to 28.7 million square feet by the end of 2008, and that there is a substantial amount of new build office space in the pipeline to come after that, such as the Business Bay office towers and now The Lagoons.
The potential for an oversupply of office accommodation in Dubai from the middle of next year is therefore clear, even if the present situation is definitely one of undersupply and not oversupply. Indeed, Property Weekly has pointed to a surge in secondary sales in the Jumeirah Lake Towers office developments and a doubling of prices since 2003, underlining the current strength of the office market.
Of course, The Lagoons will be a phased project, and not all built in one go. Sama Dubai will spread the development over a timeframe dependent on demand from investors and end-users. But this project is clearly a challenge to those local observers who contend that the real estate market is heading for oversupply in key sectors, such as luxury residential apartments and shopping malls.
However, Dubai has never shirked from launching big projects that defy conventional wisdom, and has a track record of success in the face of market skepticism. The Lagoons at $18 billion are its biggest single test thus far.