The Burj Dubai was opened today and was renamed the Burj Khalifa. It’s height, officially 828 meters (2717 feet) and 160 stories, makes it the tallest building and structure in the world by far.
Khalifa bin Zayed Al Nahyan, whom the skyscraper is named after, is the President of the UAE and Emir of Abu Dhabi. He was given the honor after greatly assisting Dubai with their debt.
The architectural and engineering feat began during the real estate boom, but was completed and opened during the downturn. This is not unique for skyscrapers, as they have previously coincided with boom bust cycles or business cycles. The Empire State Building in the US was finished in 1931 during the Great Depression and the Petronas Towers in Malaysia in 1998 during the Asian financial crisis. Mark Thornton discusses this more in depth in his essay.
Many are left wondering if the Burj Khalifa will turn out to be a good investment. Dubai, like most of the world, is suffering from a real estate crash and too much supply. However, Mohamed Ali Alabbar, chairman of Emaar, the developer behind Burj Dubai remains optimistic, stating “as of today we have sold 90% of the building and we expect it to be 90%-occupied”.
If real estate prices, whether commercial or residential, are allowed to fall across the world, it would go great lengths to deal with the oversupply, purge the bad investments, and create new sustainable investments. However, governments and central banks have been intervening in an effort to keep prices higher to avoid investment losses, which is blocking the correction process and dragging out the economic pain. Markets and investors may prefer the latter for short term reasons, but the former would result in a stronger economy over time.
