e9711d28cda49210VgnVCM200000e66411acRCRDapproved/thenational/Articles/Migration/2008-Q2Cityscape dream a challenge to buildersd9711d28cda49210VgnVCM200000e66411ac____Cityscape dream a challenge to buildersThe answer to developers problems may lie in relationships with companies at different segments of the supply chain.The answer to developers problems may lie in relationships with companies at different segments of the supply chain.<p>The natural follow-up question in the week after developers unveiled more than a dozen imaginative, large-scale projects at Cityscape Abu Dhabi is: how can they be built?
Several of the projects announced at the four-day conference were the size of small cities, such as Mubadala Development's 1.4 million square metre Arzanah and Sorouh Real Estate's 4,046 square metre Lulu Island. Organisers yesterday said that about 50,000 people visited the conference.</p>
<p>They calculated that US$36 billion (Dh132.2bn) in deals and transactions took place or will take place as a result of Cityscape projects.
But with building material prices soaring and labour in short supply, the property companies were setting themselves up for major delays, experts said.
The answer to the question of "how?" may lie in strategic relationships with companies at different segments of the supply chain.</p>
<p>"I think these kinds of relationships are going to pick up," said Roy Cherry, a property industry analyst at Shuaa Capital. "It is a strategic imperative to secure a seamless flow of materials."
"If there is an interruption, some companies are going to be able to deliver on time — the ones with relationships with the suppliers — and the others are going to be late."
Aldar Properties, Abu Dhabi's largest development company, made clear this week that it is heading down this path.</p>
<p>On Sunday, the company said it had signed a deal with Arkan Building Materials that made it a major source of supplies.
"We see a very clear gain in terms of being able to deliver certainty in the supply pipeline," said John Bullough, the chief operating officer at Aldar. "We are exploring more of these deals."
Aldar has joint ventures with the UK-based construction company John Laing and a local cement company, Readymix Abu Dhabi.</p>
<p>John Thomas, the head of the property development arm of Mubadala Development, said last week he was also seeking to forge strategic alliances with construction companies.
"We're not ready to announce anything yet, but we're exploring several of these options," he said.
Mubadala emerged at Cityscape as a new force of development in the emirate, with two major projects on Abu Dhabi Island, another on Al Sowwah Island, and a new partnership with the Kor Hotel Group to develop hotels in the region.</p>
<p>These investments are also being made to secure labour for projects in the emirates.
Many developers in Dubai, such as Emaar, have started investing in foreign property companies to gain access to their staff, as well as to gain exposure to foreign markets.
Sorouh Real Estate announced this week that it had bought a minority share of Abu Dhabi's largest brokerage firm, JLL Property, to increase its ability to sell apartments.</p>
<p>But none of these issues is as salient as the supply of building materials. By some estimates, prices are increasing by more than five per cent every quarter.
According to the research firm Proleads, demand for ready mix cement will rise by about 450 per cent to 115.19m cubic metres in 2009. Demand for steel would increase by a similar amount to 19.62m tonnes, the firm said.
"This is the biggest challenge for developers, the natural demand for materials," said Emil Rademeyer, who is the managing director at Proleads.</p>
<p>"The existing supply capacity is just not going to cope," he said.
Mr Rademeyer said in the near future, projects would have to start dramatically increasing prices to keep up with costs, resulting in some projects being cancelled because they were no longer feasible.
"There's not a project in the UAE that hasn't been delayed in some way," Mr Rademeyer said. "There will be a battle for suppliers and materials."</p>
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