January 06, 2010 12:00
The Burj Dubai, immediately renamed the Burj Khalifa after the ruler of neighboring Abu Dhabi who had to bail the emirate out, opened on Monday with a lavish ceremony announcing the world's tallest tower. The exact height of 828 m was finally revealed. But people are viewing the Burj Khalifa's future with some trepidation.
There are fears that vast spaces in the building will remain unfilled due to the economic crisis, though optimists claim such mega structures eventually win full occupancy even if they get off to a shaky start. In Korea, where around 10 skyscraper projects are in the works, the fate of the Burj Khalifa is being watched closely.
Bloomberg forecast 75 percent occupancy by the end of this year. One Dubai-based analyst is quoted as saying, "What kind of business would rent such a lavish office space at a time like this?" The Burj Khalifa is equipped with fitness centers, observation decks and state-of-the-art communications networks. But the problem is the maintenance cost, between 800 to 900 dirhams per 1 sq.m (between W251,000 to W282,000), four times more than 180 to 200 dirhams in neighboring buildings.
Mohamed Alabbar, the chairman of developer Emaar, claims around 90 percent of the space in the building has been sold and the firm is already making a profit. But apartment and office prices in Dubai, including the Burj Khalifa, have fallen 50 percent over the past year and are showing no signs of picking up again. The Wall Street Journal forecast Dubai property prices will fall another 30 percent by the end of the year.
Another concern surrounding the Burj Khalifa is the so-called "skyscraper curse," according to which countries that build such tall structures end up in economic decline. That theory was postulated by Deutsche Bank analyst Andrew Lawrence in 1999 based on cases over the last 100 years.
In 1930 and 1931, when the Chrysler Building and the Empire State Building were completed in New York City, the U.S. stock market crashed, triggering the Great Depression.
In the mid-1970s, the World Trade Center was completed in New York, while the Sears Tower opened in Chicago, but an economic slump soon followed due to the global oil shock.
In 1998, when the Petronas Twin Towers were completed in Kuala Lumpur, Asia was in the grip of a financial crisis. And Dubai was hit by a financial crisis at the end of last year, when the Burj Khalifa was close to completion.
The reason why skyscrapers are often loss-making ventures is because of their high rent and construction costs. Special construction materials are needed to build a structure more than 100 stories tall, and that doubles or even triples construction costs. And high maintenance costs raise the rent, leaving large sections of such buildings empty for years after completion.
But some claim that most skyscrapers turn into successes. The Petronas Towers are a major tourist attraction now. For three years after completion, Taipei 101 suffered from low occupancy, but now it is difficult to find space in the building.
"To say that a W2 trillion to W3 trillion skyscraper affects a country's entire economy is nonsense," said Kim Sang-dae, a professor at Korea University. "Many break even if you view them from a long-term perspective of more than 10 years."
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