Survival of the fittest

The global financial storm has proved to be a stern test for the GCC's construction industry.

A prevailing economic ‘headwind' has battered contractors and developers for the best part of nine months. Those that have thus far weathered the storm may last long enough to prove a point about business sustainability. Others are starting to crumble.

A stark contrast is emerging between those developments that began with thought, prudence and a thorough feasibility study and those that started with a dream that morphed into an opportunistic fantasy. Prudent projects, designed to meet a real demand, continue on. Key characteristics of these projects are having sufficient funding in place, retaining investor faith by demonstrating real progress, and staying within sight of a reasonable work schedule.

Over ambitious projects are suffering set backs and Ajman's Marmooka City is just the most recent example. This magazine has reported extensively on the confused dealings of Casamia Star and its Marmooka project - the Frankfurt Residence - in an effort to get to the murky bottom of what is happening with investors' money. Meanwhile a staggering 180-plus tower projects originally planned for the city have been cancelled, indicating that any perceived demand was little more than a mirage.

The delicate balance between supply and demand now appears to be at the forefront of local development plans. The Dubai Real Estate Corporation (Drec), which manages the Government of Dubai's land bank, has revealed new projects and its CEO Hesham Al Qassim, has said his organisation's mandate is to maintain the demand-supply balance. It also has ‘mega-projects' on the drawing board, but is keeping them there until there are signs of desire in the market.

Drec's move represents a cautious effort to revitalise interest in a sector where only the fittest are surviving. As the slowdown took hold, pundits spoke of a flight to quality and suggested that the downturn was what the region desperately needed, in order to weed out weak operators. While the process continues to be painful, leaner, meaner and perhaps wiser businesses are emerging.

Stuart Matthews is the senior group editor of ITP Business.

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