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Although it’s hitting all industries and companies hard, Elizabeth Moody discovers that developers can actually thrive because of economic slowdown rather than in spite of it
Now that 2008 is a distant memory and 2009 is in full swing, it would seem that we have not only been hit with the customary ‘Winter blues’, thanks to the reality of all the work in front of us, but a secondary malady that, for want of a better expression, we’ll call ‘the recession blues’.
In times past, the Middle East has welcomed in the New Year with optimistic anticipation as places such as Dubai grew with phenomenal speed. Tax-free living, combined with the prospect of excelled acceleration up career ladders, drew folk to live the dream of prosperity, as the enviable opportunity to create and work the future historic landmarks and developments of the 21st century enthused all.
Developments that set the world talking were realised through the gumption of leaders and developers in the region. The Palm Jumeirah, the Burj Dubai, Abu Dhabi’s Grand Mosque and Doha’s Aspire Tower, to list just a few, have all become iconic monuments instrumental in placing the GCC firmly on the map as one of the era’s powerhouses. However, 2009 brought with it an uncertain mood, as fear of the unknown hangs heavy in the air.
In light of global financial events being set to continue throughout the year and the prospect of the bubble bursting in an area that has really only known phenomenal growth, the word recession weighs heftily on people’s minds.
Nowhere, of course, is recession-proof and it’s hardly surprising that we have seen projects placed on hold as developers tighten their belts in preparation. “There is little doubt that 2008 was a year of two halves – with the second half showing the impact of the global slowdown here in the Middle East,” concedes Peter Riddoch, CEO of private Dubai-based developer Damac Properties.
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Keith Pepperdine, director of sales and marketing for Qatar’s Al Madar Group agrees, but is quick to add that the picture isn’t entirely bleak. “Like any developer in the current climate, we are constantly reviewing the situation and working with our clients to ensure projects progress as planned; we have not put a hold or any delays on projects due to the economic situation.”
It’s easy to get carried along by a current of negativity, but a degree of perspective could help developers to focus on the positives. If you look out any window, work continues on construction sites.
“Cirrus Developments is focusing on delivering its current projects according to budget and plan,” says Behnam Eshragh, chairman and CEO of Cirrus Developments. “We have already commenced construction for two projects, Aquarius Gate and Celestial Heights. Both were the first to start construction in Waterfront and Downtown Jebel Ali.”
“As a company, Damac has remained focused on the job of delivering properties to our customers and we will continue to do that. This is reflected in the level of progress we are now seeing at a number of our sites,” continues Riddoch. “At our Ocean Heights development, Dubai Marina, our contractors are currently completing a floor every week. This shows that we are still moving forward and not letting market speculation interfere or disrupt our day to day activities.”
Examples from the past
Although the developed Middle East may not have faced such daunting times before, others have; and history suggests that it doesn’t have to be a case of simply weathering the storm. It’s not impossible for a company to come through an economic crisis in even better condition than they expected.
The years known as the ‘roaring 20s’ were also halcyon days of prosperity and excess; in fact, in 1928, the new Republican president Herbert Hoover confidently stated, “We in America today are nearer to the final triumph over poverty than ever before in the history of any land.” By October 1929, this opulence had come to a devastating end in the form of the Wall Street Crash.
Like today, confidence faltered and widespread panic set in, leading to the onset of the Great Depression.
Yet it could be argued that this was, in reflection, a period of landmark development. The economic slump of the 1930s didn’t put a stop to New York City’s non-stop downtown building boom, with the construction of iconic edifices such as the Empire State Building and the art deco Chrysler building. Both, at the time, were embroiled in a fierce competition to become the world’s tallest building; a story not unfamiliar to developers across the GCC today.
It didn’t stop there; The Rockefeller Center was a revolution in built environments, as one of the first ‘destination’ developments. Experts at the time were sure the project would fail, but it stood as a victorious testament to real estate development during the depression era.
Today’s mixed-use developments that combine work, rest and play are all descendants of that very template. Through the bullish temperaments of developers that ploughed on with construction during the depression, the projects they completed now have their places in history firmly cemented.
In reality, some of the most lucrative businesses were the outcome of survival mechanisms during harder periods. The 30s was a decade of technological innovation, achieved through companies’ pioneering attitudes, determination and confidence in investing in and implementing new strategies. Once again, those that stuck their heads out of the parapet then are the most globally recognised today.
Increased R&D at IBM, for example, led to financial success, revolutionary steps forward occurred in car technology, new materials such as Teflon and Nylon were launched and developers initiated innovative suburban housing and out of town retail outlets with car parks.
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