Hosting the world: World Expo 2020 is set to provide a major boost for the economy

After Thailand withdrew its bid to stage the World Expo 2020, Dubai became the favourite to win, as São Paolo was thought to be too far away from much of the world’s population, and Yekaterinburg was slipping because Russia was suffering from (mainly Western) bad press, a phenomenon that equally applied to Izmir, Turkey. Weeks before the announcement, some highly placed Emiratis began to feel the bid was won.

One factor that had perhaps helped Dubai more than the misfortunes of its rival bidders, however, was that the vast majority of the new infrastructure in its presentation was planned anyway, to deal with an expected surge in tourism. This meant that there was never a serious doubt that Dubai would be left with unused and unusable facilities after the Expo was over.

The earliest date allowed by the Bureau International des Expositions (BIE) to lodge a bid was 2011 and the rules mandated that once the first bid was received, other cities had six months in which to respond. Izmir and Ayutthaya of Thailand initiated the six-month window, which closed on November 2, 2011, with Dubai being the final entrant.

The voting by BIE members in November 2013 put Dubai well in front from the outset, with 48% of the votes, compared to São Paolo’s 8%, Yekaterinburg’s 24% and Izmir’s 20%. After three rounds of voting, with the city polling the lowest being eliminated in each round, Dubai emerged triumphant over, Yekaterinburg, achieving a final 71% of the votes.

ANNUAL THEME: Scheduled to run between October 2020 and April 2021, the theme of Dubai’s World Expo is “Connecting Minds, Creating the Future”, and it focuses mainly on three areas – sustainability, mobility and opportunity – which have all been identified as key drivers behind global development.

A report by Standard Chartered Bank on the impact of the winning bid says that the interdependencies of the three chosen areas will likely have a range of positive effects, including on three central parts of the economy: housing, infrastructure and hospitality.

HOUSING: In its reaction to the victory, Standard Chartered said that, “The event is likely to lift confidence in Dubai’s housing sector by supporting long-term demand dynamics and underpinning fundamentals as the key drivers of the property-market rebound.”

With the extra hotels needed to serve Expo 2020 attendees, the real estate sector is in for a busy few years, on top of the bulging order books already for new hotels, homes and retail outlets. As Moafaq Al Gaddah, chairman of MAG Group, told OBG, “We've seen a return to core competencies in Dubai’s real estate segment where developers are doing what they do best rather than venturing into unchartered waters.”

The 438-ha site chosen for the Expo is near Al Maktoum International Airport in the less populated southern part of the city, where development plans were already in the works. The difference Expo 2020 will make is to bring the timing of some of them forward. Although estimates of the total cost of the event vary, in a November 2013 interview at the Dubai Air Show, Sheikh Ahmed bin Saeed Al Maktoum, chairman of the Dubai Expo 2020 High Committee, suggested that Expo infrastructure, both permanent and temporary, would cost a total of Dh29.7bn ($8.1bn).

Over the six months of the event, the emirate is expected to earn total revenues of Dh140bn ($38.1bn) from Expo-related activities. Estimates also suggest that between 270,000 and 300,000 jobs will be created as part of preparations, with Standard Chartered suggesting that most jobs would come between 2018 and 2021. Citing the 300,000 number, the bank added, “To put this number into perspective, the 2011 labour force survey conducted by the Dubai Statistics Centre recorded a total of 1.32m people employed in Dubai, of whom 1.27m were expatriates.”

NOT WITHOUT RISKS: The authorities anticipate the event will attract 25m visitors, of whom 70% will come from abroad. Alan Robertson, regional chief executive of Jones Lang LaSalle (JLL), said in an Expo report, “While the Expo will result in long-term benefits to the Dubai economy and the real-estate market, the short-term impact needs to be managed carefully to avoid the inevitable boost in sentiment translating into excessive price growth or over development.” JLL estimates that the supply needed to accommodate 2020 visitors is 45,000 additional rooms, with some visitors staying in other emirates, Oman, Bahrain or Qatar. The report notes that Expo visitors could be a catalyst for a burst of expansion at Al Maktoum International, which handled its first commercial passengers in October 2013. An extension of the Dubai Metro’s Red Line to serve the airport, increased conference space, and developments to the logistics hub in the area are all long-term benefits to hosting Expo 2020, the report added.

LOOKING TO THE FUTURE: A number of property developers have major land holdings around Dubai World Central and plans to develop these are likely to be “kick-started” on the back of the improved sentiment resulting from the World Expo decision, said JLL. “Nakheel has recently launched 500 new land plots in their Al Furjan project at Jebel Ali and we would expect a rash of further announcements over the coming weeks, as other developers seek to sell either land plots or ‘off-plan’ residential units,” JLL added.

A new focus on shifting economic activity to the emirate’s south was a fact not lost on investors, even before the winning bid was announced. This in turn will almost certainly boost demand for Dubai Investments’ land holdings as well as its residential and commercial developments in the area. Investors have driven up the value of its shares, which at one time were showing a rise of 121% against an overall stock market index gain of 67%. Dubai Investments owns Dubai Investments Park, a big mixed-use development adjacent to the Expo site, as well as other land nearby.

In casting around for other (listed) companies that could prosper on the back of Expo2020, investors also alighted on the low-cost carrier Air Arabia, as it is the only listed airline in the UAE and its shares rose by 63%.

TRANSPORT INFRASTRUCTURE: Port operator DP World, which runs Jebel Ali port, could have another reason to cheer after seeing first-nine-month figures for 2013 show it handled more than 10m containers for the first time during that period of the year. With so much construction activity scheduled for property on DP World’s doorstep, it would be natural for the port to handle much of the imports of construction materials, machinery and equipment needed not only for the Expo site itself but also the surrounding hotels and retail facilities. The firm’s shares also rose, by 36%, although, generally, enthusiasm for port shares is down due to tough global conditions in the industry.

And if DP World is ready to bring in things, the local airlines are gearing up to bring in large numbers of people. State-owned carrier flydubai placed an order for up to 111 Boeing 737s, with deliveries starting in 2016 and Emirates Airline placed a 150-plane order for B777Xs – comprising 115 B777-9Xs and 35 B777-8X – and a 50-plane order for A380s. These expanded fleets will provide the airlines with sufficient capacity to meet surging demand resulting from Expo 2020.