Downturn Dooms Showcase Skyscrapers

Prestige projects in boomtowns such as Dubai, Moscow, and Shanghai have been put on hold as the global economic crisis hits financing and demand

They were certainly heady years. In cities like Shanghai, Moscow and Dubai, the urban landscape was re-invented at breakneck speed. Revolving construction cranes dominated skylines and economic growth was measured in the number of stories a building had. It was a high-stakes gamble involving money, steel, and glass.

In the new urbanism, nothing could happen quickly enough, nor could anything be praised loudly enough. Numerous entities had their fingers in the pie of each major deal, from banks to investors to brokers. There were no limits to the business savvy and the flows of capital involved.

Anything seemed possible. Every new building was supposed to a superlative, so that it could serve as visible proof of enormous economic power. Yearnings for pomp and prestige were transformed into architecture. Some designs were reminiscent of perfume bottles, others of rockets.

But now the enormous real estate bubble of the sheikhs, oligarchs, and neo-capitalist financiers has burst. The international economic crisis has caught up with the nouveau-riche high flyers in the Middle East and Asia who, until recently, had gloatingly watched the collapse of the West, where one skyscraper project after the next has been abandoned. But now the brakes are also being put on one construction project after another in Dubai, Saudi Arabia, and Russia.

The globalized world is truly proving to be a single entity, one in which the collapse of the market affects everyone. There is suddenly a lack of credit or demand—often both—for the countless square meters of newly constructed office, retail, and residential space. And the construction moguls have been nervous for a long time.

One of the centers of the new era was Dubai, a city on the Persian Gulf with no history, no special mineral resources, but with a seemingly unlimited future. Dubai was a promising real estate mirage which gradually became reality. Its mantra of "build it and they will come" worked for years. The masters of Dubai even created new luxury building sites by developing artificial islands in the shape of palm trees. Two groups of islands are already complete, but a planned third group is now likely to be put on hold.

An event held in Dubai one Friday in December showed just how different things are looking in the Gulf city these days. The invitation revealed, as usual, only the most important details. Aiman Holding planned to unveil a project it called "The Twelfth," consisting of a high-rise residential building on one of the palm islands. The event was to be held at the five-star Raffles Hotel. Guests would apparently only be allowed entry if they presented a copy of their passport and checkbook.

Ordinarily, it would not have taken any more than that to fill a ballroom in Dubai with real estate investors. They came by the dozens whenever a new real estate developer appeared on the scene, and by the hundreds when an established vendor announced that it was accepting bids for a luxury residence, an office tower or a shopping mall. There were times when speculators in suits and ties would camp out in the lobby to be the first to place their orders.

That might have still been the case in October, but not today. At 11:30 a.m., an hour and a half after the beginning of the event, 10 real estate agents are sitting alone at their tables. The model of the residential high-rise looks abandoned next to the opulent, untouched buffet. There was no deluge of customers. No one was interested in the penthouse pool, the four-story garage or the private beach with a view of the Dubai skyline.