With the weight of the financial crisis still holding back real estate developers, some are finding it necessary to delay or even cancel projects.
Nakheel, one of the world’s largest privately owned real estate developers, announced in mid-January that it has stopped construction on the Nakheel Tower for 12 months. The tower will purportedly be one kilometer high, making it the tallest in the world. This has lead to the layoff of construction workers, in addition to the 500 employees already axed by Nakheel in Novemberw 2008.
In the first week of January, Dubai’s real estate company Meydan LLC canceled the Nad El Sheba racecourse construction deal with the Malaysian firm WCT Berhad — formerly known as WCT Engineering Berhad — and Arabtec. Meydan’s chairman told Arabian Business that the deal was canceled because the joint venture of the two companies was unable to “deliver certain zones” of the project on time and was confident that Nad El Sheba will not be delayed for the Dubai World Cup in 2010 since new contractors will be appointed.
The magazine added that WCT told OSK research the racecourse faced minor delays two months ago, mainly due to changes in the project designs required by Meydan. It was reported that WCT will request compensation of $84 million for the cancellation. WCT and Arabtec refused to comment further on the issue. The $1.3 billion development will include a 1.2 kilometer grandstand with a capacity of 60,000 people, a five star-plus hotel, restaurants, a museum and covered parking for 10,000 cars.
Two weeks after the Nad El Sheba racecourse was canceled, Arabtec was also forced to stop work for a year, at least on the $654 million Atrium project, after the Dubai-based Sunland group — the project’s developer — called for the delay without announcing why. The Atrium project is located in the new Madinat Al Arab area. It covers more than three million square feet, includes three basement levels and two 68 story residential towers blended together and was supposed to be completed in 2013.
As well, the Harman City Complex, which is part of the City Complex in Las Vegas, has been canceled. The complex was being developed by Las Vegas-based CityCenter holdings, a joint venture between MGM Mirage and the Dubai World subsidiary Infinity World. Robert Baldwin, president and CEO of CityCenter told Emirates Business 24/7 that, “by cancelling The Harmon condominium component, we will be able to avoid the need for substantial redesign resulting from contractor construction errors.” The cost saving anticipated by the company due to the cancelation amounts to $600 million.
Al Futtaim Group Real Estate, the company developing Dubai Festival City, has also delayed work on parts of the $2.99 billion project. According to The National, at least three projects in Dubai Festival City had been stopped, including W Hotel, the Al Badia Business Center, an extension to the retail facilities that opened in 2007, as well as the Four Seasons Hotel. The company has taken this step in order to benefit from a further fall in construction costs due to the financial crisis, which would enable it to reduce its expenses. Other real estate companies in the region are also suffering.
In Qatar, the Ras Laffan Industrial (RLC) City, run by a Qatar Petroleum management team, is revising projects due to the drop in oil and construction material prices. RLC, located 80 kilometers northeast of Doha and covering 106 square kilometers, is one of the most important projects in Qatar. The city hosts an industrial port and several industrial facilities. It provides integrated services to businesses including modern infrastructure, security, fire and safety facilities, a medical center, an environment section and a support services area.
As more projects are frozen, either due to the lack of liquidity, the fall of construction material prices, or corporate disputes, these delays will further deteriorate investors’ confidence in the property market and set back its eagerly anticipated recovery.
