What the Iran War Means for Dubai's Luxury Boom

Hiten Samtani (0:02)

Bloomberg Audio Studios, podcasts, radio, news.

Tracy Alloway (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:21)

And I'm Joe Weisenthal.

Tracy Alloway (0:23)

Joe, obviously there's a lot going on right now in the Gulf. One of the things that's been happening is that Iran, of course, has been sending drones across the sea and over to the UAE and hitting various energy infrastructure assets, but it's also been hitting some non-energy infrastructure assets, such as hotels, consulates, residences.

Joe Weisenthal (0:47)

Right. Of course, we've seen, for example, the various strikes. We're going to talk about Dubai specifically in this episode. The interesting thing about Dubai, as we know, is there's been a lot of people who've moved there, lots and lots of money, to say the least. But part of the appeal there is here is an island of stability. Not just an island, and this is the part that interests me.

Tracy Alloway (1:12)

Not technically an island.

Joe Weisenthal (1:15)

And not just an island of stability within the context of the Middle East. There is this growing perception all around the world, particularly in rich countries, where people don't like what's going on with taxes, where they don't feel safe about the trajectory of politics in these countries, etc. This sort of ongoing feeling of deterioration of various flavors where they're from. And it's like, you know what? I want to live in a country that has low crime, a high level of stability, and to be crude, escape the failing West. Exit, as they say, and the idea of exit loyalty and voice and so forth.

Tracy Alloway (1:55)

Right. So this is really interesting because in addition to styling itself as the island, proverbial island of stability, as we say.

Joe Weisenthal (2:02)

They also make real islands, right?

Tracy Alloway (2:04)

They make real islands, that's true. But they've also styled themselves as, and I'm stealing this from the guest that I will introduce in just a minute or two, but they've styled themselves as the capital of capital.

Joe Weisenthal (2:16)

Yeah.

Tracy Alloway (2:16)

Right? So here is this region that has an enormous amount of money from oil wealth. And a lot of that money has been flowing into not just real estate in the region itself, but real estate externally in the West. We know that there are big sovereign wealth funds in the Middle East and they invest in all sorts of things. Lately, there's been a lot of private debt investment, which is an interesting one, given the concerns around private lending at the moment. They've invested in, famously, US treasuries, tech stocks. Like the UAE, Saudi Arabia are huge, huge forces when it comes to tech valuations at the moment. And so when you kind of start connecting all of these things together, you have to ask, what is the situation in Iran actually mean? Not just for the idea of Dubai and Abu Dhabi as this sort of expat paradise, but also as this locus of an enormous amount of money that tends to flow around the world.

Joe Weisenthal (3:20)

Absolutely. And again, like this is a place where those with means, those with like lots of money, are feeling like this is arguably the future. This is where I want to set up shop. Ray Dalio has a family office that's in the UAE and so forth. And historically, there have been these places, these places where capital wants to be either have a literal or figurative footprint. Switzerland, of course, long time in that category. Singapore, perhaps similar, but you have people in the West, you have a lot of people in the UK, and you're like, you know what? This is where I'm going, this is my bet on the future. I'm betting my future, the future of my money, the future of my business, somehow to be domiciled figuratively or literally in Dubai, the UAE, et cetera.

Tracy Alloway (4:10)

There's also something that the UAE in particular has done, which is it's achieved this sort of diplomatic or strategic ambiguity, I guess you could say, where it's a place where everyone from the US to Russia, and to some extent, Iran, can do business, right? So there's a big question over whether that continues at all. Anyway, we do in fact have the perfect guest. I actually think this is a really good way to look at the sort of interconnection of global capital and some of the gray market stuff that happens in the UAE, is through property and commercial property in particular.

Joe Weisenthal (4:47)

Totally.

I just want to say, this is not the first time we've talked about the UAE. Certainly, we've talked about the Gulf. But even prior to the last few weeks, in my mind, I've thought I want to do more on this topic specifically. In England, it's a very big deal. It's a very big part of the sort of news and politics, how many of their wealthy have left over the years to go to the UAE and so forth. I wonder to some extent, the UAE, and I'm not the first person to make this observation, but if you imagine this place with an extraordinary amount of abundant natural resources, et cetera, a world in which there is an extreme, and it makes a miracle look very pale in comparison, an extreme gap between the haves and the have-nots, et cetera. Sometimes I think about, like, you know, is the future of the world essentially Dubai-ified, where you have this very tiny slice of people who are just insanely wealthy, a kind of, you know, to use a popular parlance, a permanent underclass within the same thing, a place where there are a lot of these successful people are like something you talk a lot about, which is, is the future of the economy just like people who look really good and so forth? No, for real.