x Abu Dhabi, UAESunday 23 July 2017

Depressed building costs a boon to developers

Construction costs have fallen as the economic downturn bites, providing unexpected relief for developers

Dubai's major City of Arabia project is on track, with the economic downturn being more of a help than a hindrance by bringing down construction costs, its developer says. The US$5 billion (Dh18bn) development - including the Mall of Arabia, which will be the world's largest shopping centre, and a theme park called Restless Planet featuring full-scale robotic dinosaurs - is still due to open on time, said Syed Khalil, the group executive director for City of Arabia, which is being developed by Ilyas and Mustafa Galadari Group. The financial turmoil that has hit both the property sector and retailers in the UAE had worked to their advantage, he added. "The economy is down, but at the same time, the prices [of construction materials] are down. We are taking advantage of this downturn to trim our budget and get the project going. That is our formula." The City of Arabia is located at the gates of Dubailand and is expected to be home to about 40,000 residents. The development also includes Wadi Walk, a waterfront community of outdoor cafes and low-rise apartments, and the Elite towers residential property. The property sector in Dubai has been one of the hardest hit by the financial turmoil. High-profile projects such as Trump Tower have been postponed and real estate companies have laid off hundreds of employees. Meanwhile, the cost of construction has gone down, with the price of steel on the London Metals Exchange dropping in the past year. On May 5, medium steel hit a high of $1,120 a tonne. On Tuesday, steel closed at $333. Delayed projects may also have increased the supply of contractors, driving down the costs of their services, said Mark Morris Jones, the senior director for retail and industrial property in the Middle East and North Africa at CB Richard Ellis. "It is perhaps a better market in terms of availability of manpower and materials than it was maybe two months ago," he said. Retailers, however, have seen little benefit from the tightening credit markets. Consumers, while still positive, are less willing to part with their cash than they were six months ago, according to MasterCard's latest consumer confidence data. But Mr Khalil sees this as a temporary setback. With the UAE's hefty financial and oil reserves, he believes the country will rebound in time for the mall and theme park's opening, scheduled for the end of 2010 in the first phase of the development. "If normal conditions return to Dubai, I think we can have about 35 million footfalls [visitors] per year," he said. He anticipates between 10,000 and 12,000 visitors on average per day to Restless Planet, which will be directly linked to the mall. Between 50 and 60 per cent of the park's robotic dinosaurs for the $300m theme park had already been built in Tokyo, he said. "Dubai will come back with a bang," he said. "Dubai will be back to normal, inshallah, by the beginning of 2010." aligaya@thenational.ae