ArabianMoney.Net

The announcement of 500 redundancies at Dubai government-owned Nakheel, developer of the Palm Jumeirah and part owner of the newly opened glitzy Atlantis Hotel has underlined the very obvious fact that the property boom is over. There has been a string of lay-offs from the 200 to lose their jobs at the largest private developer Damac to rumors about redundancies to come at Emaar Properties and other real estate related groups.

A somber mood has settled over the owners of the 46,000 of-plan property units either presently under construction or delayed in the emirate. Certainly the market for selling new, and reselling part-paid, off-plan units has collapsed while re-sales of the 35,000 units completed since real estate ownership for foreigners was legalized in 2002 have halved this autumn, although sales do continue at the reduced level.

Occupancy levels in Dubai’s hotel sector have plummeted at a time of year normally the peak tourism season.

Nakheel axes projects

Nakheel has also announced the delay of work on major projects including the Trump International Tower and Hotel on Palm Jumeirah, Waterfront, Palm Jebel Ali and The Universe. The developer also says it is delaying long-term infrastructure work on projects including the Frond N villas, Gateway Towers and Trump International Hotel and Tower on the iconic Palm Jumeirah island.



At Nakheel’s Waterfront mega project, work on the Madinat Al Arab, Venetto, Badra and Canal District is continuing as planned. But other phases will be delayed, and it has slowed reclamation work on the Palm Deira, the largest of the Palm island trilogy while the pace of construction on components of Palm Jebel Ali is to slowdown.

Work on The Universe, a collection of reclaimed islands under one already completed called The World, will also be restricted to preliminary studies.

It is much quieter on the road in Dubai this autumn and the talk in the conference margins is about what the government may or may not do to salvage its vision for the city. The main hopes are the coming new banks for real estate finance and a debt-for-equity swap with Abu Dhabi. Dubai has around $80 billion in public debt while Abu Dhabi has net cash, so a friendly deal is widely anticipated.

IPO impossible

Nakheel has been running its slide-rule over a $15 billion initial public offering, according to Gulf News, which is surely some kind of a joke. For that is how it would be received in current markets. The shareholders from the $5 billion DP World IPO are still counting their losses from its IPO last year. Besides who could possibly subscribe with global stock markets in turmoil and oil under $50?

Contractors and builders are understandably seriously worried about the outlook, particularly for new business in Dubai when current contracts expire in 18 months time. But there is still a construction boom in Abu Dhabi and neighboring Qatar, and many firms are preparing to move on. All the same, Dubai has many projects as work-in-progress and that represents a substantial backlog to keep the city’s wheels rolling through the recession of 2009.

In the meantime, the city’s famously proactive policy makers may surprise with new initiatives. However, consolidation and rationalization is the word of the hour, the opportunities will follow.
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