I visited Dubai last week, and it has to be one of the best places on the planet to be an architect right now. It looks a bit like a Lego Movie version of a city, where each skyscraper has a unique and memorable silhouette that looks almost a little too perfect. Literal neighborhood names like Business Bay, Knowledge City and Media City heighten the sensation that Dubai is like a movie version of a city from the future.

Like the Manhattan market, which has continued to decline over the past few years, residential real estate sales in Dubai have fallen 11% year-over-year, continuing the downward trend that began in 2015. Bloomberg (and most everybody else) attribute this decline to "oversupply in the residential market." Word on the street is that owner/investors are feeling panicky about the price decline and surging rental vacancy rate, but in spite of all that developers continue to build more units.  

The UAE does not have an MLS (multiple listing service) and the local people tend to be intensely private, so local property listings site PropertyFinder.com (which is a bit like Zillow) has a lock on listings information. To get a feel for the market, check out the available properties in affluent enclave Emirates Hills where gated private residences sell for $10 million and up. As you can see, ultra high-end buyers have plenty of existing options, but in this town where caviar seems to grow on trees, build-to-suit is still the ultimate luxury. One developer mentioned building a 55,000 sf house for a client.

Despite softening in the for-sale market in Manhattan, the Manhattan rental market has remained quite strong. Not so in Dubai, where the rental market is seeing rent declines of between 10 and 40% which could be nothing short of disastrous long-term.

The city’s 9.5 million-ish expat residents tend to be transient and so generally rent rather than buy. That explains why about 50% of the city’s newly built condo housing stock is investor owned, usually by UAE citizens and other GCC-region investors.  

What about the rest of the Dubai real estate market?

Real estate is the local football, but the teams are Emaar, Sobha, Damac, and if you don’t have a laser light show or a mile-long billboard emblazoned with your team’s name, then you definitely aren’t in the championships.

In general, the city appears to be pristine, growing and bustling. Construction still appears to be booming with cranes littering the horizon and giant billboards advertising new high-rises and master-planned communities. New, design-forward, high-concept restaurants are everywhere, generally concepts with New York City, Monaco or London origins. (Prediction: we’ll be importing Dubai restaurants and brands to New York City in the not-too-distant future.)

Roadside retail vacancies look just like they do stateside (that is to say about half empty), but the Dubai malls are packed and storefronts appear to be well-occupied.  

Last-mile delivery startups seem to be sending motorcycle-driving delivery men in every direction, which is particularly noteworthy because the Emiratis were among the last to embrace in-home mail and package delivery since it was viewed as a bit too invasive by the highly-private locals. It is hard to imagine a Dubai without packed shopping malls, but if this trend continues and Amazon takes hold the way it has elsewhere, the locals may have to find another pastime to replace shopping when their malls start looking like American malls--hungry for tenants and searching for relevance.

The few publicly-listed Dubai REITs are trading below NAV and with juicy dividend yields that warrant further research given our rosy future outlook for the region. Dubai stocks are also taking a beating from the real estate woes, too. (In fact, last week was the “worst week for Dubai stocks since 2016” according to Bloomberg, which they attribute almost entirely to the property glut.)

Yes, the Dubai market is in the midst of a correction, and yes, in hindsight, this overbuilding, oversupply and cyclicality was inevitably predictable. These old photos of Dubai from StepFeed show how much the UAE has developed since 2000.  It’s remarkable! Here’s a glimpse:

But, the Emiratis have accomplished a lot in a short time and have a lot to be proud of. The smart money will not bet against Dubai over the long term. Dubai is a model city that feels like the future--a very, very opulent future.