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She also pointed out that the real estate and construction sectors are leading drivers of the UAE's economy, with annual growth rates predicted to reach 24.4 per cent and 29.6 per cent by 2010, respectively. The sectors are expected to combine to contribute about 23 per cent of the country's economic value by 2010, compared to 16 per cent in 2006.
However, Al Qasimi warned that 'unbridled growth in the Gulf real estate sector may not be sustainable'. The Gulf market also faces labour and skills shortages, and it needs to closely monitor global issues to address risks posed by a lack of liquidity.
Challenges abound
Nakheel CEO Chris O'Donnell said many developers in the gulf are having difficulty meeting project delivery dates due to labour and skills shortages. He predicted that developers will be more cautious and prudent when they consider new project launches. 'Some developers have over-extended themselves in their project offerings and are now facing huge losses,' he said.
O'Donnell also warned that property prices could not continue to increase at their current rate, and that the public would not continue to pay top prices. If prices cannot be controlled, 'we will end up cooking the golden goose', he said.
One of the key constraints that all speakers agreed on was the labour shortage. In the UAE, contractors are struggling to compete for labour with India and China because of the decline of the dirham, said Gurjit Singh, executive director of property development at Sorouh Real Estate.
If the shortage continues, labourers will become a scarce resource. 'Where you could have 10 labourers in the past, maybe you will only have five. Contractors will need to ensure their long-term sustainability by offering them a career path, good wages and living conditions,' he said.
O'Donnell agreed that the labour shortage is a 'huge issue', noting that Nakheel has had problems with strikes and shortages. He said one way to combat the problem is to reduce the dependency on the physical workforce. 'There is too much labour, and not enough equipment,' he said. 'Contractors here utilise labour to a great extent because it's relatively inexpensive but that's not going to last.'
He believes contractors should make a greater investment in mechanisation, which would improve safety and efficiency and reduce the number of workers needed for a project.
Need for partnerships
Virtually all panellists agreed that adopting a more integrated approach would help speed the delivery of projects and lower costs. Specifically, O'Donnell called for a 'design and build' approach rather than the traditional design process that is commonly used throughout the region. Characterised by its integrated team approach that allows for more decision-making equality between the developer and the contractor, design and build allows the contractor to take a more central role in the design process. 'There are more contractors heading in this direction,' he said.
Denis O'Connor, CEO of Abu Dhabi Commercial Properties, agreed that contractors need to be given a more integral role in the planning process. 'Until late in the last century contractors would enter the project when there was absolute certainty about the design and they delivered the project according to these specifications.
'It's not like that today, where you see design continuing well into the construction process and many of the characteristics that determine the success of the project are unresolved. I think we have learned that the contractor needs to become more a part of that transition process.'
See also:
Ten reasons Dubai real estate will continue to boom
Dubai real estate soon to be the most expensive in the world?
Rents set to skyrocket as property shortage bites
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Jeff Florian, Senior Reporter
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