Clusters of cranes were a common sight during the property boom two years ago. Ryan Carter / The National
Clusters of cranes were a common sight during the property boom two years ago. Ryan Carter / The National

Crane strain as UAE adapts



At the peak of the property market, a rumour went around that 20 per cent of the world's cranes were in Dubai.

While the actual figure was closer to 1 per cent, the skylines of the major cities of the Emirates were testament to the major building work taking place. Construction workers teemed over sites and the cranes towered over edifices that reached for the sky.

Nabil al Zahlawi, the managing director of NFT Cranes, one of the largest suppliers in the region, fondly remembers those days.

"Almost all of our cranes were leased out," Mr al Zahlawi says. "The rates were good and we were investing in more equipment."

Now his business, a crucial part of the construction supply chain, leases out only a third of its 600 cranes.

The once-resilient property sector of Abu Dhabi is also slowing. Mr al Zahlawi had leased out four cranes to initial contractors hired by Mubadala Development, a strategic investment company owned by the Abu Dhabi Government, for a project to build a Dh5 billion (US$1.36bn) stadium that was put on hold last month.

"They wanted to have 22 cranes when construction was fully under way," he says. "Now we have to collect the cranes we leased out and forget about this project for a while."

Another blow came when Masdar decided to postpone its larger development by several years.

The rescheduling of these major government-related projects is part of a broad review of grand schemes launched amid the property boom in 2008.

Like his colleagues, Mr al Zahlawi has had to seek out new business elsewhere in the world. The price of renting a crane has dropped by 50 per cent from its peak. NFT is providing a rate that does not even take into account depreciation its the equipment.

"Everybody is desperate to reduce the price to get any business," he says, adding that at present the only vibrant sectors in the UAE are construction of petrochemical projects, infrastructure such as sewerage, and to some extent schools and hospitals.

The property consultancy Jones Lang LaSalle mentioned the recent decline of Abu Dhabi building in its third-quarter report, saying developers have been forced to "reassess their schemes, scale back more ambitious projects, seek alternative means of funding and plan product more aligned to the end-user".

Residential property is particularly affected, said the report, with the planned supply of homes likely to be cut by about 60 per cent, compared with the developments and towers announced in 2008.

In Dubai, the situation is also challenging. Many contractors are still involved in long arbitration cases to receive payment for past work, and they now require greater guarantees from developers before starting new projects. Hundreds of companies are in talks with developers about unpaid fees and contracts.

The largest number of these involve the property subsidiaries of Dubai World and Dubai Holding, both of which are in the middle of restructuring their obligations.

Several strategies are being explored by companies associated with the construction industry to weather the downturn.

The international division of Speedy, a UK equipment supplier, spent £8.5 million (Dh50.3m) this year buying equipment such as generators and compressors from the construction company Carillion in the UAE.

The company also signed a deal to manage the equipment for Carillion.

"Let's be frank, cash is a premium at the minute," says Andy Carter, the managing director of the regional Speedy office. "A lot of these large infrastructure companies want to conserve cash, so why wouldn't they want to sell their equipment?"

The deal allowed Carillion to raise cash and Speedy can rent out equipment that it does not need now that the downturn has cut activity.

Mr Carter says he has seen large amounts of unused equipment during drives around the UAE, much of which is for sale at low prices. Shrewd companies doing business in Asia and Africa are buying much of this.

Speedy is also trying to expand beyond equipment rental by becoming a manager of equipment on sites. By tracking equipment, making sure unskilled workers are trained and working machines harder, they can cut costs.

During the boom, companies were less concerned about the details as they pulled in giant contracts. Now, Mr Carter says, they are trying to cut costs out of every possible arrangement because their margins have dropped sharply.

Like NFT, Speedy is looking to expand across the region, particularly in the more vibrant economies of Saudi Arabia and Qatar. But the UAE is a good base for operations, says Mr Carter.

"We have certainly seen a lot of jobs that were due to start get delayed," he says. "That's quite common across all of the UAE.

"But for us it is still a lot going on here and room for growth. The financial crisis has hit here, but not as bad as perhaps Europe."

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