UAE: Delayed, Downsized or Scrapped!
Posted by 7starsdubai on December 10, 2008
05 December 2008Dubai –
Several major construction projects in Dubai have been delayed while others could be cancelled altogether, as the credit crisis forces developers to reconsider budgets.
Announcements that Nakheel Trump International Hotel and Tower and Meraas’ Jumeirah Gardens project are to be postponed come after months of speculation about what effects the global recession would have on the construction industry.
“I think a number of development projects have been put on hold rather than cancelled altogether,” said Ronald Hinchey, resident partner at property consultants Cluttons.
“I think the authorities will take steps to inject liquidity into the market, which is what this problem has been caused by in the first place.”
Hinchley added that off-plan residential developments, especially in areas such as Jumeirah Lake Towers and the Marina, were especially vulnerable to cancellation.
Those which were in the process of being built stood a much greater chance of being completed, he pointed out. A government seminar will be hosted by Minister of Public Works Shaikh Hamdan bin Mubarak Al Nahyan on December 24 to discuss the implications of the financial crisis on the construction sector.
The industry accounts for 20 per cent of the UAE economy and represents the major thrust of the initiative to diversify the economy away from oil.
However, according to a report by Al Mal Capital, growth in the industry will slow from 20 per cent to 15 per cent next year, and 13 per cent by 2010.
But these problems may not have been unforeseen.
Shortly after the announcement of the Dh350 billion Jumeirah Gardens at Cityscape in October, investment bank EFG Hermes wrote in a briefing note: “While these projects received a lot of attention due to their scale, we believe their timing cannot be considered to be ideal given the reduced appetite for new projects as a result of the global crisis.
“Moreover, the tighter liquidity picture raises the question of funding, which was not particularly addressed.”
Khaleej Times took a closer look at a few of the major projects here which have been delayed, downsized or could be cancelled amid the new climate.
Construction Company Could Lay Off 5,000 Workers
DUBAI – Up to 5,000 jobs could be cut in a Dubai-based construction firm, a senior source in the company said.
In addition, at least three major projects run by the company have been cancelled, as well as a number of other smaller projects. The job cut would reflect a 10 per cent cut in the companyís staff which, as one of the Middle Eastís largest construction companies, has nearly 50,000 workers.
The senior official, who spoke on condition of anonymity, said that uncertainty had gripped the workforce.
Up to 150 jobs have already been lost in one project, and the work force is also being reduced in the other projects, the source said.
A new wave of job cuts was expected around December 10, he added.
“I’ve been working for the company for less than a year and it could be a case of last in, first out”, he said, adding that both senior and lower levels of the workforce were being affected.
“Banks are tightening lending, so some developers are unable to pay for the construction costs and jobs are being cancelled,” he said.
An official spokesman for the company was unavailable for comment at the time of going to the Press.
Jumeirah Gardens Announced at September’s Cityscape exhibition, Jumeirah Gardens promised to be one of the largest developments in Dubai’s history with a cost-estimate of Dh350 billion.
The timing of the development, which covers residential districts as well as the kilometre-high ‘One Dubai’ tower, was questioned shortly after its announcement.
Despite doing away with some of the streets in Satwa, unconfirmed reports suggest that the project may have already been scrapped.
Several senior staff at project developer Meraas have been laid off.
“In a worldwide economic downturn, any corporate must analyse the market and ensure that its business strategy is aligned to make the most of new opportunities,” an official spokesman for the company said.
Porto Dubai It was announced as a residential offshore development that would offer direct views of the Burj Al Arab from the villas built on ‘tiers’ cut into the island. However, the current design of Porto Dubai is already a smaller one from that originally conceived by consultants two years ago.
Asteco Property Management acted as an adviser on the initial stage of the project but stopped work after it ‘changed size and shape’, a source said.
Industry insiders claim that construction at the site may have halted altogether and that 200 staff have been cut from the parent group.
However, the CEO of Zabeel Properties, Robert Norton, who spoke to Khaleej Times denied both accusations, adding that views of construction site have just been obscured by a huge mound of sand.The Palms Nakheel’s Palm Deira is the largest of the three Palm developments and is expected to house one million people. However last month, the developer announced that dredging work was to be scaled back on the project.
Frank Jeuniaux, area manager, of Belgium-based Dredging International, said he expects contracts to be much less readily available in future.
Infrastructural work on parts of Palm Jebel Ali which are not due to be populated until 2011 and 2012 will also be scaled back.
Delays would also occur on Palm Jumeirah at Frond N villas and Gateway Towers.
A spokeswoman for Nakheel said: “Work on Palm Deira is currently being directed to complete reclamation in areas closest to the shore, so that once these areas are complete we can undertake progressive land sales and development.”Trump International Hotel and Towers Located on the trunk of the Palm Jumeirah, the 62-floor, split tower development was expected to offer access to a private beach and yacht club. However last week officials announced that the joint project between the Trump Organisation and Nakheelhad been delayed.
“Nakheel is delaying long-dated infrastructure work on some of our projects in order to ensure that our business model is aligned to meet market demand,” a spokesman for the company said. “We have the responsibility to adjust our short term business plans to accommodate the current global environment.”
Hydropolis Originally billed to be completed in 2009, the Jules Verne-inspired underwater hotel was about being as extravagant as they come.
The architectural marvel included a giant retracting roof that would enable open sky events to take place in the main ballroom.
The project, which is the brainchild of developer Crescent Hydropolis, was several years ago valued at Dh1.6 billion and construction began in the summer of 2005.
However, a source at SIBC Industrial Building Consultants, who were initially charge of managing the project, said that the company had not heard anything from the developer for a while.
“I’m pretty sure it won’t be completed by 2009,” he said.
CEO of Crescent Hydropolis, Uwe Hohmann said: “I cannot disclose anything at present. We will meet with our shareholders next week and a decision will be made then.”Arabian Canal Billed as the world’s longest man-made canal, the Limitless project is anticipated to stretch 80km from Dubai Marina to Palm Jebel Ali and includes a variety of residential and commercial developments.
However, the Dubai World company announced that it was reviewing the pace of development of the project with respect to market conditions. The project is a two-stage development expected to be completed by 2025, and a spokeswoman for the company said the first stage is continuing at a ‘torrid’ pace.
It is believed that any delay would be over when subsequent stages would be completed.
Reports have suggested that the company had put on hold the selling of property that would come as a result of the development, but a spokeswoman denied that anything had been formally put up for sale.
By Martin Croucher
© Khaleej Times 2008
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