Dubai's ambitious $6bn Heart of Europe project on The World Islands artificial archipelago faces mounting challenges as the Middle East crisis deepens. Developer Kleindienst Group has laid off staff and faces lawsuits from investors and former employees, while contending with a sharp drop in international visitors and surging diesel costs for off-grid generators. The French Riviera-themed Côte d'Azur resort, part of the development, has pivoted to local staycations, boosting occupancy from 27% in March to 56% in May, with a target of 80%.

However, the Venice-themed resort remains on paper, and other islands like the Anantara resort, developed by an entity founded by former DP World chief Sultan Ahmed bin Sulayem, closed in April. Across Dubai, the war is separating stronger developers from vulnerable rivals, with regulators informally warning larger groups they may need to absorb cash-strapped competitors. Josef Kleindienst insists the project is a long-term tourism development, not a conventional property scheme, citing regulatory changes that forced redesigns of the Floating Seahorse underwater homes, with 72 units now under construction.

Law firm Al Tamimi & Co partner Euan Lloyd expects a shift toward more conventional projects.