The Worlds biggest Shopping-mall = The Worlds biggest flop?

I saw that the worlds biggest shopping mall just opened up in Dubai. I have seen it being built for the last 2 or so years as it is just next to our office in Dubai. The road I have taken to work was changed just about every week to make space for the mall. Now it is opened but at the same time the world economies are having a major crisis. So far the reporting in Dubai in general has been positive and spending has been continuing. The signs have though been there that a change was on the way.

About one and a half year ago EMAAR ,one of the largest construction companies, suddenly decided to sell of a larger amount of the apartment blocks they had built for rental. The tenants were basically informed that they had to purchase their apartment within 2 weeks cash or face eviction. Knowing that EMAAR is a multi billion dollar company trying to do a move like that with over 4000 apartments was strange. There was very little to no news reporting about this and other similar strange moves in Dubai.

The minister of Finanace in the UAE still seems very positive as the GDP and inflation has been in the double digits for the last 2 years so even if there was a decline in the overall costs and sales it would not potentially hamper operations in Dubai too much as per their predictions.

Within the last 24 hours there are though a multitude of news reports popping up that houses on the Palm island has dropped over 40% in value and people even try to use SMS spamming to try find buyers. About 40,000 Mobile phone users received a SMS with an offer to buy cheap?! if they were fast. In other places heavily loaned house buyers are trying to sell of fast. Probably not at a loss yet if they purchased about 5 years ago as then their prices where much lower than now.

The market in Dubai have over the last 6 years expanded so extremely that about 20% of the world construction cranes sit in the country. A massive amount of loans have been given and small time investors have purchased several apartments on speculation with full intention of selling them at a much higher price even before they were finished.

Already when I arrived in Dubai in 2002 there was apartment blocks completely empty. Not because people did not want to rent but due to that the owners simply refused to lower the rent and rather kept the apartments empty. But this meant that whole buildings with 200- 300 apartments could stand empty. The boom is now starting to shake in its foundation fast.

Banks are refusing to give loans to expats all over the country. Simply because they expect that there will be larger layoffs off people in large portions of the businesses. Even if Dubai by itself has a lot of money to invest in construction, based on oil and the profits from the Iraq wars the main part of the companies working in the country is companies that have their HQ somewhere else in the world. Dubai by itself do not have any raw material thus it is built on the trade and potential refinement of raw material imported.

The main travel companies in Europe are seeing a stop in the holiday bookings and are cutting down fast among the destinations and booking of hotel for charters, thus the influx of tourists for the shopping malls and hotels in Dubai will shortly also take a big hit. The newly opened Atlantis hotel has dropped the room rates from 400+ USD to around 44 USD per night with less than 30% occupancy rates.

Gulf news
By Suzanne Fenton, Staff ReporterPublished: November 22, 2008, 23:27
Dubai: Business at Atlantis, the $1.5 billion (Dh5.5 billion) hotel on the Palm Jumeirah is slow, with room rates slashed dramatically and occupancy low.
Despite the grand opening of the resort on Thursday night, which saw stars and celebrities descend on the Palm, causing actual residents difficulty accessing their own homes, business is not so impressive. Full story

With all this I would guess that there is a quite big chance for Dubai taking a Guiness World Record Title they probably would not want to see nor ever expected. The Largest Shopping-Mall in the world becoming the Largest shopping flop in the world in the shortest time ever. Over the last week alone the retail business has dropped over 20% in some areas.