Dubai: Abu Dhabi’s construction and real estate development sector is getting familiar with billion-dirham plus paydays.
Just 48 hours from the opening of Cityscape Abu Dhabi 2014, it received its biggest yet — a substantial Dh37.7 billion for infrastructure and social housing projects to be undertaken by government and government-owned entities.
And just two months ago, a Dh22.4 billion deal came Arabtec Construction’s way from Aabar Investments for multiple towers in Abu Dhabi and Dubai.
Arabtec Construction itself is taking on a developer’s role with newly formed Arabtec Properties showcasing its upcoming properties for the first time at Cityscape Abu Dhabi.
Three of the five projects are in Abu Dhabi, including the ‘Rancho Ghantout Development’ which is still in the masterplan and feasibility phase, and the C11, an upscale mixed-use development on Reem Island’s Shams, The Gate development.
“We look forward to unveiling a series of our planned and current projects, which will include the one-million home project in Egypt,” said Nabeel Al Kindi, CEO of Arabtec Properties. “The presence of companies spanning all sectors of real estate development locally and regionally is a testament to the market’s strong recovery.”
That Abu Dhabi needs the extra stock — in residential, hospitality and retail — is without argument.
“The uncertainty in the property market of past years is gone, and there is stability [in] the price growth,” said David Dudley, head of the real estate consultancy JLL’s Abu Dhabi office.
“There’s job security to boot and these factors are prompting a growing pool of investors and owner-occupiers to buy.”
Abu Dhabi’s clearly-defined investment zones — the Yas and Saadiyat islands as well as Lulu Island, Al Raha and Reem — will generate much of the new capacity and be the magnet for developers and investors. There is also some action on a stretch of development activity closer to Abu Dhabi’s border with Dubai, the Al Ghadeer project from Aldar, which will create more than 2,000 homes.
JLL’s estimates of sales and rental trends for the first quarter of this year seem to suggest that the sales cycle is starting to pick up. Sales were up 9 per cent over the fourth quarter, while the rental market grew by a more prosaic 4 per cent.
“The planned stock in the marked investment zones is more than adequate to take care of the projected growth in population,” said Dudley. “It’s unlikely at this stage that additional investment zones will be created.”
Damac Properties, which started the handover of its two high-rises in Abu Dhabi late last year, is looking out for more.
“We have certainly found the Abu Dhabi market is strong, especially in prime locations, including Reem Island,” said Niall McLoughlin, senior vice-president. “There is a great deal of infrastructure coming online in Abu Dhabi in the coming months, which will only support the growth.
“We are close to completing the handover with all of the owners. All units have been placed on the market and are close to selling out — just a small number remain available.”
But developers would do well to keep a close watch on the cost parameters.
“Competitive forces are ensuring that in the main the construction costs do not differ emirate by emirate and in fact in many cases the same main contractors are used for the projects,” said Simon Townsend, business development manager at DTZ.
“Material prices such as for concrete are continuing to rise and as such construction costs are seeing increases; many developers are becoming more cost-sensitive as sales prices, especially for off-plan — are locked in and any variances will impact their profit margins.
“As for plots, the price points within individual developments for land can range significantly... but in the main land parcels in Abu Dhabi are less expensive [compared with Dubai’s].”
But that may not be the case for long if developers start priming the project pump in Abu Dhabi in right earnest. It could start as early as this week, at Cityscape Abu Dhabi.
