Europe January 4, 2010, 1:30PM EST

World's Tallest Tower Opens in Dubai

The long-awaited Burj Dubai—renamed Burj Khalifa—officially opened on Jan. 4, but the downshift in Dubai has left unsold space in the showpiece skyscraper

Dubai's Burj Khalifa tower, the world's tallest skyscraper Karim Sahib/AFP/Getty Images

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By Zainab Fattah

(Bloomberg)—Dubai's Sheikh Mohammed bin Rashid Al Maktoum opened the world's tallest tower today and renamed it after the ruler of neighboring Abu Dhabi, which bailed out Dubai during the country's debt crisis last year.

The 200-story Burj Khalifa cost $1.5 billion to build, said Mohammed Alabbar, chairman of developer Emaar Properties PJSC. The tower takes it name from Sheikh Khalifa Bin Zayed Al Nahyan, who is also president of the United Arab Emirates. While mainly residential, the building will have 37 floors of office and retail space.

During the five years of the tower's construction the sheikhdom's debt-fueled property market went from the world's best performing to the worst, forcing officials to renegotiate loans and seek bailouts from Abu Dhabi. The Burj's occupancy rate may reach 75 percent this year, with office leasing proving the biggest challenge for investors, said Roy Cherry, an analyst at investment bank Shuaa Capital PSC.

"Those who bought with the intention of leasing will face a difficult time because few companies today can justify paying premiums for luxury," Cherry said.

Burj Khalifa has a height of 828 meters (2,717 feet), Alabbar said in a telephone interview today. Apartment prices in the tower, formerly known as Burj Dubai, have fallen to less than half of the 10,000 dirhams ($2,700) a square foot that they reached at the 2008 peak.

'Expensive'

"It may still run at a premium to the rest of the market but I'd be surprised if there were no defaults and if vacancy rates didn't creep up," since a large proportion of the developer's sales were financed through mortgages, said Saud Masud, a Dubai-based analyst at UBS AG. "This is a symbol of the economic momentum that Dubai had and an ironic reminder of its property bubble."

Dubai real-estate prices have fallen by 52 percent since the market's peak as owners struggle to cope with thousands of empty properties started before the global credit crisis stifled investment. Even after developers canceled billions of dollars worth of projects, enough new buildings will come onto the market this year to push down prices further.

The Dubai tower "is the most expensive square footage in the region and I'm not sure in the current downturn that will translate into strong residential or commercial demand, despite the prestige factor," Masud said.

The residential part of the building will have fitness facilities, a library, a cigar club, valet parking and a gourmet market, according to the tower's Web site. The goal is an "unparalleled lifestyle experience," the site says.

Maintenance Fees

The building has some of the highest maintenance fees in Dubai at 80 dirhams to 90 dirhams per square foot annually, according to Dubai property broker Better Homes. Fees in the surrounding area average about 18 to 20 dirhams.

"This is a building with many unique components which could cost a lot more than usual to maintain or replace," Shuaa's Cherry said.

Designed by Chicago-based Skidmore, Owings and Merrill LLP, the structure overtook Taipei 101 as the world's tallest in February. Emaar delayed completion of the project by more than a year because the interior had to be redesigned. The tower has 200 floors, more than 160 of which will be occupied, Alabbar told reporters at a press conference in the building today.

Lights, Fireworks

Emaar is celebrating today's opening with light, water and firework displays. Thousands of tourists and residents gathered in the area surrounding the Burj, which links to Dubai Mall and the world's biggest fountain, hours before the event started at 8 p.m. local time.

Roads leading up to the tower were clogged, forcing residents of the Downtown development to leave work early in order to get home. Sultan al-Falasi, a 35-year-old businessman from Dubai, reserved a suite in the Address Hotel facing the Burj and invited friends to watch the fireworks.

"This makes me proud to call Dubai home," he said in the hotel lobby. "It shows that despite the circumstances, we are capable of finishing such an important landmark."