Dubai, the United Arab Emirates' bustling city in the Arabian Desert where scores of high-rises are springing up, is succumbing to the global recession that has struck the U.S. and other economies around the world.

Developers have flocked to the Persian Gulf to study Dubai's state-of-the art technology, including construction of the world's tallest building, the $20 billion Burj Dubai, and to participate in the building boom. Houston-based developer Hines opened a 40-person office in the capital, Abu Dhabi, and is building projects there.

But despite the area's wealth, the recession is casting a pall over the city, warns Gerald Hines, founder and chairman of the privately owned firm, which controls assets of $22.9 billion. Credit has become scarce in Dubai and projects have been halted in mid-spire, he says. “There's no equity available or debt available on any big projects.”

Rick Hafeez, a real estate agent, recently moved to Dubai from Houston and has garnered 22 listings valued at about $5 million, he says. But the market is frozen, he adds, although the city is filled with construction cranes.

Recent U.S. visitors to the city of 1.4 million were stunned by the sophistication of its projects. About 200 members of the RealComm Conference Group, a research organization, attended the RealTech Middle East 2008 conference in November, studying next-generation buildings. They were wowed by the nearly complete Burj Dubai, towering over 160 stories, with a hotel and apartments.

“Developers here don't only focus on intelligent buildings, but also on intelligent communities with hospitals, government buildings, hotels, retail and office space,” says Darlene Pope, managing partner of RealComm. She was impressed by the Burj Al Arab, the only seven-star hotel in the world, designed like the billowing sail of a boat.

Mick Dalton, senior director of asset management at Emaar, developer of the Burj Dubai, explained in a webinar some challenges of creating an exceptionally tall building, including getting power and telecommunications to the top.

Access can become a life or death issue, Dalton says. “In the event of a fire, how do you get firemen up into the building and still communicate with them from each floor? We have an intercom system throughout the building for the firemen to plug into.”

Just changing the aircraft warning lights atop the seven-story spire poses a hazard. “How do I get a guy up there when the spire's moving about two meters from side to side while he's changing a 250-pound aircraft warning light?”

The 2,300-foot Burj Dubai won't be the tallest building for long. A taller one is planned in Saudi Arabia, says Jim Young, RealComm founder and CEO.

Dubai engineers managed to pipe water to a massive residential development, islands shaped like palm fronds. “It's like a James Bond movie where you disappear into the water; it dips underneath the sea in a tunnel system and ends up on the other side,” Young says. “It's architectural and technological innovation we haven't seen anywhere else in the world.”

At the Hydropolis hotel, visitors take a boat to the lobby. “From there you descend under the water to the reception area. The majority of hotel rooms are actually under water. Your view from your bedroom is not a sunset or the Burj, it's a dolphin swimming by,” Young says. “If it's going to be done anywhere in the world, it's going to be done in Dubai.”