Building Projects in Dubai Put On Hold
It is little surprise that Dubai’s massive building projects have largely been put on hold. Dubai’s immense wealth has been seen as a safe bet for many lenders interested in cashing in on Dubai’s building boom. But that boom may be over soon than anticipated. In a stunning announcement yesterday, Dubai World Conglomerate, which the government of Dubai uses for financial purposes in many cases, announced that it would be asking its creditors to allow it to halt debt payments for six months. The holding company also said that it plans to restructure.
The news should provide an interesting test for the global economy. Even though the news initially sent U.S. stocks lower (the Dow dropped 200 points on open), losses have been largely pared. The Dow is just over 100 points down now as investors start to lose their blinders a bit and focus on Black Friday hopes. However, the day is a short trading day, ending at 1 p.m. Eastern, instead of at 4 p.m. This could mean that there isn’t enough time for the bulls to overcome the bears. However, the weekend will provide some time for reflection, and time for investors to decide whether or not the global economy is strong enough to absorb this blow.
The Dubai news does present an interesting chance to look at the state of commercial real estate around the world. Since last year, when the global financial crisis hit, there has been a slowing of commercial building. Large projects have been put on hold around the world and in the United States. Even residential builders are still having difficulties. In general, getting the financing to back these projects has been difficult. And, with the latest happenings in Dubai — a real estate capital of the world — it will be interesting to see whether more reticence in general is seen with regard to real estate lending.
