Analysts warn of job cuts for UAE developers

Aldar unlikely to be the last industry player to trim its workforce in bid to cut costs
Analysts warn of job cuts for UAE developers
About half of construction projects in Dubai were cancelled in the wake of the economic crisis
By Claire Ferris-Lay
Wed 02 Nov 2011 12:39 PM

Aldar
Properties, Abu Dhabi’s largest property developer, is unlikely to be the last
to cut staff numbers if a slowdown in the UAE capital’s construction industry
worsens, analysts said.

Any fresh
delays to major infrastructure projects in the oil-rich emirate could force
new rounds of redundancies for developers still reeling from the collapse of
Dubai’s property market.

“Aldar’s
situation is not an isolated one. The issues they face are common to those of
many other developers,” said Charles Neil, CEO of Dubai-based Landmark
Properties.

“This
sector will continue to shrink over the next three years as developers either
leave the industry or re-invent themselves and go in to new activities.”

Aldar on
Monday announced said it would slash its workforce by 24 percent as it seeks to
match its manpower needs to its scaled-back construction schedule. Sorouh Real
Estate, Abu Dhabi’s second largest developer by market value, said in July it
had trimmed staff by 17 percent over the previous year as it sought to cut
costs.

Further
job cuts were possible as projects reached completion, the company said.

“In
general most developers are facing big issues as to how exactly they are to
keep their businesses going as starting new residential or commercial projects
is a non-starter because it is difficult to raise money from the banks,” said
Neil. “The off-plan market is dead, and raising capital from the public is
difficult in view of the weak equity market.”

UAE
developers were badly hit by the global economic crisis, which saw property
prices decline by around 60 percent as banks curtailed their lending and
speculators left the market.

About
half of construction projects in Dubai, the Gulf’s busiest builder until
late-2008, were cancelled in the wake of the financial crisis, forcing firms to
seek out work in new markets. 

Nakheel,
the developer behind Dubai’s palm-shaped island, cut more than 1,000 jobs during
the financial crisis as it struggled to restructure $16bn of debt.

UAE
developers have since relied largely on the security of state-backed projects
to underpin their balance sheets, but the delay of Abu Dhabi’s planned Guggenheim
and Louvre museums has raised fears of a fresh contraction in the industry.

Developers
could announce further job cuts amid the slowdown but many are already working to
lower staff levels, said Andrew Goodwin, director of DTZ in Abu Dhabi.

“Yes,
there’s also going to be job cuts in the industry. It all comes down to where
they are employed; infrastructure projects take lots of people to work on
them,” he said.

“It’s
the pattern at the moment. The issue is who are the people left…are pretty trim
anyway as everyone is operating a lean ship at the moment.”

Investment bank Arqaam Capital said last week that Abu Dhabi
was likely to see further scaling back of non-essential projects as the emirate
moves to reschedule its construction aims.

“I can envisage infrastructure - everything from civil and
social infrastructure - being completed and handed over. Things like schools,
hospitals, roads, contracts on that nature are likely to go through,” analyst
Mohammad Kamal told Arabian Business.

The bank described Abu Dhabi as “fast becoming the worst
construction market in the GCC, after Dubai.”

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