The clients: Dubai Electricity & Water Authority, Abu Dhabi Tourism Authority
Until recently, the good times have been very good for everyone working in the Gulf construction sector. This has been particularly so in Dubai where a seemingly never-ending stream of new developments was brought to market week after week.
But the industry simply could not keep up. Salaries rocketed, materials prices doubled and contractors could pick and choose which schemes to work on. But now the property sector has peaked and a long awaited correction has arrived, bringing with it a refreshing breath of realism.
Staff levels are stabilising, unnecessary real estate projects are being scrapped and materials prices have fallen. Professionals in the region are unsurprised by the turn of events, but some have been unprepared for the pace of the correction and for how to handle clients who are unwilling or unable to pay their fees.
For every firm with a good spread of sectoral and geographic projects, there is another which is over exposed to Dubai real estate and which must quickly redeploy staff or face having to make job cuts. In the worst cases firms will be forced to leave the region, and for some smaller local firms bankruptcy is a possibility.
But Dubai is just one part of an enormous region. It is a place of extremes and unfortunately for some, the scale of its ambition has been matched by the scale of its inability to cope with a lack of international funding. Other states are not so unfortunate. Locations such as Abu Dhabi, Saudi Arabia, Qatar and Oman are not so highly leveraged, nor have they allowed real estate developers to over extend supply beyond realistic demand levels.
On the infrastructure side, all states including Dubai are continuing to invest heavily in new roads, bridges, rail links, desalination plants, wastewater treatment facilities, power stations and transmission infrastructure. Not to mention educational and public housing projects. These less glamorous investments are the core drivers that will see the region’s construction sector continue to grow into 2009 and beyond.