World Expo Bid Fuels Dubai's Ambitions
Last month, the Bureau of International Expositions (BIE) met to review the legitimacy and preparedness of the five city-bids to host the 2020 edition of the World Expo. Thailand's Ayutthaya was eliminated due to lack of government support, leaving Yekaterinburg (Russia), Izmir (Turkey), Sao Paolo (Brazil) and Dubai (UAE) to woo the 166 BIE members, ahead of the final closed session vote in late November.
For Dubai, the odds certainly appear to have improved over the past six months with the announcement of several new mega projects and the government's collective efforts to bring the 2020 Expo to the Middle East for the first time. The planned fast tracking of Dubai Metro's $1.4 billion (AED5 billion) Red Line extension to Al Maktoum International Airport in Jebel Ali and the Expo 2020 site underscores the commitment of authorities to the bid.
Dubai's list of superlatives from the world's biggest, tallest and most audacious have earned the emirate a global reputation; however a successful bid would help to cement Dubai's re-emergence on the global stage, following the crippling impact of the "great recession." Even now, funding for the newly launched mega projects remains challenging; The Sovereign Wealth Centre in London recently suggested that sovereign funds (SWFs) would avoid Dubai, following the emirate's boom-bust cycle. It is clear that Dubai Inc will have to tap into alternative sources, such as bond markets, to a greater extent going forward in order to compensate for the reluctance of banks and SWFs to extend credit towards Dubai's new real estate projects. The success of this will to some degree depend on the global appetite for risk.
U.K. Foreign Secretary William Hague's May announcement in Westminster of Britain's official backing of Dubai's bid comes in the wake of London Mayor, Boris Johnson's recent visit to the UAE, where he too endorsed the emirate's bid. With the U.K.'s support, Cluttons are confident of a rise in cross border investment activity from the U.K., which is Dubai's second largest FDI source. Dubai's bid appears to be gaining further momentum with the June announcement of France, which is also throwing support to Dubai Expo 2020.
The cosmopolitan Gulf emirate already embodies the essence and ethos of a World Expo; a successful bid is likely to see the acceleration and rejuvenation of several more of Dubai's iconic real estate projects that are already starting to make a gradual comeback. Cluttons expects that some may even be accelerated to coincide with the proposed October 2020 kick off date for the Dubai World Expo.
The overall levels of rising investor confidence are being further enhanced by government backed schemes that play into the hands of Dubai's key pillars of strength--trade, tourism and hospitality. The increased economic activity is translating into rising levels of employment activity and subsequently, demand for housing is also escalating, which is being reflected in capital value growth rates. In the six-months to the end of Q1 alone, house prices have risen by between 14.6 percent and 20.2 percent, suggesting that Dubai is very likely to end 2013 amongst the world's top performing residential markets.
Dubai's existing world class transportation infrastructure and reputation for staging international events already puts it well ahead of the other bidding cities. But with the full backing of the UAE government, Cluttons is confident that authorities will pull out all the stops to ensure that the 2020 Expo is an unforgettable global extravaganza that will help showcase what has been achieved in the run up to the United Arab Emirates' Golden Jubilee in 2021. Steve Morgan is a partner in Cluttons based in the United Arab Emirates, where he oversees commercial and residential valuation services for the Sharjah, Dubai and Abu Dhabi offices.