Some of Dubai's Office Buildings Will Be Empty Forever

Quite an interesting statement, coming from the CRBE: "Dubai’s Worst Office Buildings Will Be Empty Forever". Yet another Bubble-Economy has collapsed, but markets have still not priced and when they do, bad things will happen to the currencies of the region, the CDS traders, and all the debt holders — because of course, even if the building stay empty until the end of time, some paid for them to be built, and that money has been spent.

Oct. 14 (Bloomberg) -- Some Dubai office buildings are so ill-conceived and poorly located that they will never be occupied, while others may command no more than the cost of maintenance, according to CB Richard Ellis Group Inc.

“Some buildings will be permanently vacant and will never be let because they are wrongly located, they are of poor quality or have the wrong legal structure in place,” Nicholas Maclean, Middle East managing director for the U.S. property broker, said in an interview.

Speculation fueled Dubai’s property market after foreigners were allowed to buy real estate in parts of the emirate in 2002. Buyers with no experience in property management flocked to purchase floors in planned office buildings before any work started, resulting in poorly finished towers in inconvenient locations with multiple owners, Maclean said.

My question is: wasn't this the case in almost every country? The US, Canada, Australia, the UK, most of Europe excluding Germany, etc.?

Such places have to compete for tenants in a Dubai market with an overall vacancy rate of 40 percent, with newly developed areas on the outskirts hit the hardest. At least 20 million square feet (1.85 million square meters) of space, about 40 percent of Dubai’s existing office supply, will be added in the next four years, CBRE estimates. That will put further pressure on prices that slumped by 60 percent on average since the peak in mid-2008.

60% drop in 2 years. That's an impressive world record, I would say! And you still have 40% vacancy rate...

“The further you are away from Sheikh Zayed Road, the less desirable the location and therefore the quicker rents fall,” Maclean said, referring to the main business thoroughfare near Dubai’s coast. “Why would you go there when you can get accommodation for a relatively low price closer to town?”

Landlords are providing incentives such as rent-free periods of as long as 12 months on seven-year leases and fitting-out allowances to attract tenants, Jones Lang LaSalle said in a report earlier this month.
[...]
Dubai had 2.6 million square meters of offices under construction as of June, the third most in the world after Shanghai and Moscow, Colliers International said in a report this month.
[...]
The Dubai Financial Market Real Estate Index [...] has fallen 85 percent from a record high in September 2005.

85% drop in 5 years... That's what we're going to see everywhere in Bubble Economies, including China and the UK, and yes, including Australia and Canada. Unfortunately, 85% is not the end, and prices will decline a lot more. I wouldn't be surprised to see another 30 to 50% decline from here, in Dubai, given the facts mentioned in this report.