Abu Dhabi Developers Cutting Back as Credit Slows
03 November 2011
In Abu Dhabi today, a scene emerges echoing that of its neighbouring emirate Dubai when its property market spectacularly crashed in 2008. You wouldn't exactly call it a crash in Abu Dhabi, but a lack of investment and private financing is causing developers in the emirate to postpone or even cancel developments and cut back on staff.
During the boom, Dubai became famous for the razmatass of its developments, including the world's tallest tower, and a man made island resort in the shape of a palm tree. Meanwhile Abu Dhabi focussed on developing beaches, promenades and used natural and manmade islands to act as centres of culture and entertainment.
In 2008, as Dubai crumbled, Abu Dhabi put together a 20 year plan to end its economic dependence on oil, to have an economy that was instead driven by industry and tourism. Now 3 years later, Abu Dhabi is having to adapt to a new reality, with much lower levels of private financing that it envisaged at the plans inception, and when many of its government sponsored entities were formed. According to sources the private financing dropped off in 2009, and the government has been heavily subsidising the plans ever since.
Now it is having to slow this funding down, and developers are postponing projects. Aldar Properties, Abu Dhabi’s biggest developer, plans to cut its workforce by 24 percent as it focuses on existing projects and properties that generate steady income, the company said this week.
Government-owned Tourism Development & Investment said on Oct 29 that it would delay the completion of the Zayed National Museum as well as branches of the Louvre and Guggenhem due to the “magnitude of work.”
Masdar, a $22bn state-owned renewable energy company, shelved plans for a 100,000 sq m headquarters building that would produce more energy than it uses, it said in September. A year earlier, the company scaled back the zero-carbon ambition for its purpose-built city and delayed the city’s first phase by two years to 2015.
“They are downscaling to reality,” said Saud Masud, an analyst at Dubai-based Rasmala Investment Bank. “You don’t have ample liquidity today to finish projects. Abu Dhabi as a sovereign state is solvent, but there is a liquidity problem in sectors like real estate.”