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Price of Oil Tracked by Soaring Heights of Dubai's Skyscrapers

The construction boom around the Persian Gulf is drawing architects and engineers from all over the world.

By William Wallis and Jim Pickard, Financial Times
July 10, 2006

For 20 years, the 39-story World Trade Center, built in 1979, was Dubai's tallest tower. It is still featured on the 100-dirham bank note. But, cased in off-white concrete to shield it from the desert sun, it now looks like a stunted relic of a previous oil boom.

Since oil prices started their ascent from $9 a barrel in 1999 to more than $70 today, developers have been planting skyscrapers along the Sheik Zayed superhighway with the same alacrity with which the French once lined their routes nationales with poplar trees.

The construction boom in the Persian Gulf region is padding the earnings of the world's architects and engineering and project management firms. Interior designers are also cashing in as the owners of new hotels, shopping malls and private mansions compete to set their properties apart.

There is so much business that many foreign companies are turning away smaller contracts and struggling to find and keep qualified staff.

Stewart Tyler, global property director at Hyder Consulting, says that because of the number of construction companies with a toehold in the market, fees are relatively low.

"All sorts of people are seeing opportunities here," he said. "So although the price of hotels is going up, for example, you are not seeing the margins for contractors or builders going up in the same way."

The boom is at its most intense in Dubai, where oil revenues are dwindling but an economic diversification strategy has set the pace for the region, attracting investments from oil-rich neighbors. Mohamed Kamal, an analyst at Dubai-based Shuaa Capital, said that the United Arab Emirates had announced $312 billion of projects since 2004, with more than 100 towers planned or under construction in Dubai alone.

Saudi Arabia has announced about $250 billion of projects in the same period, and Kuwait, Qatar, Bahrain and Oman are catching up.

With its design for the Burj Dubai, the firm Skidmore Owings & Merrill won the bid to reclaim the world's tallest building for the Middle East. The tower, off the Sheik Zayed road in central Dubai, is expected to be complete in 2008, taking the title held until 1996 by the Sears Tower in Chicago.

George Esstathiou, managing partner at Skidmore, says the region accounts for 14% of the company's global revenue. And gulf investment in construction is beginning to generate business as far afield as Morocco, India and the U.S.

WS Atkins, Britain's largest engineering company, expanded its Middle East and China business by 55% in the last year, reporting sales of 67.1 million pounds (about $124 million) in the year ended March 31, out of total group revenue of 1.4 billion pounds.

Atkins employs 1,450 people in the gulf, said Tim Askew, regional managing director. He says the group is working on 31 projects including highways in Qatar, oil platforms in Saudi Arabia and residential and office towers in Dubai.

"When the oil price is high, the Middle East is busy. When it's low, it's quiet," Askew said. "At between $22 and $28 a barrel, there was already a boom. At $60, $70 a barrel, the surplus is enough to keep the boom going for some time."

Sylvie Gagnon, who set up the regional offices for design consulting firm Hirsch Bedner Associates, recalled the days when local tastes favored interiors with sumptuous gold leaf and silk brocade.

"This hotel," she said, sitting in the foyer of Dubai's ultramodern Emirates Towers hotel designed by Norr Group Consultants, "made the difference. More people since have asked for more modern."

She said there was a growing trend of bringing in signature designers and architects. Gianni Versace and Giorgio Armani have stepped in to provide design and branding for separate Dubai hotels. Among architects, Britain's Norman Foster and Iraq-born Zaha Hadid are among recent entries, and Richard Meier,who designed Los Angeles' Getty Center, is rumored to be in discussions with the office of Dubai's ruler Sheik Mohammed ibn Rashid al Maktum.

"Sheik Mohammed can afford to set a trend," Gagnon said.

But on ecological sustainability, the region is more of a laggard. The gulf's reliance on air conditioners and its propensity for glass exteriors has helped place it among the highest per capita consumers of fuel, with the UAE among the worst offenders. The trend is exacerbated by the construction boom.

Askew of Atkins says attitudes are beginning to change on this front too.

Two giant wind turbines straddling the Bahrain World Trade Center, designed by Atkins, will provide as much as 15% of the buildings' energy needs.



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