Dubai is a great example of how global cities can adapt and thrive in uncertain times.
By Nader Museitif
Global cities, just like global companies, find it difficult to ride an economic boom and avoid the subsequent cooling off period. Economies are increasingly complex and competitive, and pressure is growing on cities to remain relevant in an age of connectivity and fast technological shifts.
Dubai is no stranger to this. Much of its local dynamics have danced to the tunes of the global economy. Oil prices halved and with that came a lot of investment scale-backs. Volatility in Europe and Asia put pressure on global trade and consumption, while regional conflict and instability have weighed on business sentiment.
As a result, real estate prices have fallen in variable magnitudes (but in no way similar to the 2009 crash). Softening prices can be seen as a slight relief after a few years of sky rocketing activity.
But Dubai is no longer about real estate alone. While still a major employer and driver of growth, real estate is just one of several fast growing areas of the economy. The food and beverage sector is one example, and a natural consequence of the sprouting residential and commercial developments. Billions have been invested in restaurants and coffee shops and many would argue there’s still much more space to cater for underserved segments.
A solid hospitality sector has also emerged. When room at the mid-range Ibis Hotel goes for around $270 per night during Gitex, the annual IT exhibition, you get an idea of how much demand there is for hotel accommodation. And while some hotels are reporting falling occupancy rates, they’re still running at 75 percent and more—and that’s outside peak times. So it’s not a bad picture altogether, with increasing tourists and business travelers the city is undergoing significant investments from hotel chains as well as less luxurious three and four star operators.
But if there’s one way the city is hedging itself for the future, it’s with technology and entrepreneurship. Over the last five years, Dubai-based technology startups have multiplied. The city has managed to attract talent and funds and create an ecosystem for them to try out their ideas. Several accelerators and incubators have risen to help channel entrepreneurial efforts, such as IN5 and Astrolabs. Even the events focusing on entrepreneurs and investments like Arabnet, TieCon, and STEP have shifted their regional focus to Dubai. The likes of Google and Facebook have also chosen to set up their regional quarters there.
Like in most emerging markets, the regional startup space is still maturing and the learning curve is steep. But everything points towards a massive upside if Dubai continues to diversify its activities and cater for more professionals and ideas. Seeing from success stories in the United States and the UK, a successful startup scene may very well trump the long-standing dependence on old, low-margin, and volatile sectors.