Developers and contractors have had to deal with sluggish civil works, delayed delivery of materials and limited workforce, while suppliers are grappling with rock-bottom prices, according to industry sources.
“As COVID infects the global economy, no industry or business is truly immune. The obvious fallout in terms of delays due to the disruption to work on sites, material supply disruptions due to closed factories and shipping delays are symptoms of an economic disease,” said Avin Gidwani, CEO of Industry Networkers.
And, as the crisis continues to deepen, project proponents may eventually have to deal with higher tender costs, as contractors are expected to factor in the economic toll of coronavirus. As for incoming projects, there have been no new launches of late.
“The UAE [construction] market was weak prior to the virus and this has continued. We have found that projects in the design stage have been slowed down rather than put on hold and no real decisions are being made at the moment to move forward with any new projects,” said Bob Flanagan, managing director for project management and cost consultancy services at Colliers International Middle East and North Africa (MENA).
Unlike in Saudi Arabia where only essential projects were allowed to continue during the lockdown, Flanagan said existing construction works in the UAE have continued. “But onsite productivity is down due to a number of reasons,” said Flanagan.
With coronavirus infections still raging worldwide, he said there is a general fear among the labour workforce that they might contract the virus, and they’re cautiousness on-site is having an impact on the progress of work.
The tight measures imposed by the government, particularly the social distancing requirements in transportation vehicles, have also made it difficult to get workers to and from construction sites.
Some projects have also had to deal with a limited workforce, as there have been labour camps that have positive cases of coronavirus and some staff were put in quarantine.
“[There’s] difficulty in sourcing basic materials, such as silicon, nails, dust masks (now surgical masks), screws due to the closure of builders providers. Some contractors are now purchasing such materials from the large main retailers like Lulu and Carrefour,” Flanagan added.
And, as for materials sourced outside the UAE, shipping and transportation time has considerably slowed down. “Deliveries of cross-border materials have slowed due to the time it now takes to get through land borders because of the sterilization processes at the borders. This is having a direct impact on the program and amount of worksite,” said Flanagan.
Projects are also hitting a snag, as there is difficulty having higher or senior management on-site to investigate issues and make “on the go” decisions to progress the work.
The UAE government imposed a series of precautionary measures in March in a bid to stem the spread of coronavirus, which has now infected more than 3.6 million people worldwide. Commercial establishments, including malls, restaurants and cafes were shut down, and students and workers were sent home. Commercial passenger flights were also halted.
Restrictions in the UAE have eased since last week. However, as international borders remain shut and social distancing and other precautionary measures are still strictly enforced, the impact of coronavirus continues to be felt.
Impact on suppliers
According to Bharat Bhatia, CEO of steel manufacturer Conares, the slowdown in construction activities across the country has caused a huge dent in demand for materials, while prices have also moved south.
“Currently, we see the business activities are down by 50 percent in terms of demand and off-time,” Bhatia told Zawya.
“The problem is that we see no projects being announced in different emirates. [Currently] ongoing projects make Dubai busy in the construction sector. Normally, we see parallel new project announcements in other emirates, which is not happening at the moment. Due to this, the same traders are not willing to buy additional quantity of steel products from us in the steel manufacturing industry,” Bhatia added.
He clarified that he hasn’t seen any work stoppage related to existing projects. “All the current projects are doing well. We only see a huge decline in new projects. Also, in some of the areas, we see quarantine measures being imposed,” Bhatia added.
Every year, Conares produces one million tonnes of steel products, including steel pipes, rebars and pre-painted coils. It also operates three steel bar mills. Despite the decline in demand, Bhatia said, they have not resorted to salary or job cuts.
“If things will not improve as we expected, then we will have to take some measures,” he added.
The UAE is one of the biggest construction markets in the Gulf Cooperation Council (GCC) region. According to estimates by BNC Network, a total of 23,000 projects were active in the region at the end of March 2020. New projects worth $21 billion were announced during the first quarter, with the UAE bagging more than half (59 percent) of the pie.
Some developers are already feeling the economic toll. Nakheel has just cut the salaries of its employees by as much as 50 percent, as the pandemic starts to bite.
However, despite the challenges posed by the coronavirus outbreak, some businesses remain confident that, with Dubai’s proactive and resilient leadership, the economy will be able to beat the downturn.
“So far, we have seen a swift, outstanding enactment of policy from both federal and local government authorities in an attempt to support businesses and residents during these trying times,” said Farhad Azizi, CEO of Azizi Developments.
Azizi noted that work on their projects has not been delayed despite the supply chain disruptions caused by coronavirus. “Most projects are progressing rapidly - all of ours at Azizi are in full swing. Some developers, such as ourselves, have received a special permit from the government that allows us to work on some projects,” Azizi told Zawya.
Despite the pandemic, he noted that during the first three months of 2020, their company has cast over 112 slabs, poured more than 55,000 cubic meters of concrete and built over 1.3 million square feet of built-up area, with monthly average building progress of nearly 8 percent and more than 1.6 million recorded man-hours.
“We have not faced any supply chain issues, having sourced all necessary products well before the crisis. Our construction is therefore unaffected,” he pointed out.
“Our developments are progressing swiftly despite the current global situation, with construction being one of the very few vital, fully operational sectors,” he added.
Azizi, however, admitted that they will not be rolling out new projects anytime soon.
”This, however, is not due to COVID-19 or other market conditions. Rather it is due to the extensive amount of developments that are already in our pipeline and that we are focusing on delivering,” he said.
Colliers, however, estimated that the coronavirus outbreak will influence the cost of construction in the UAE in the near future.
Project proponents are likely going to have to deal with higher costs, as contractors are expected to factor in the issues they go through related to the pandemic, including restrictions on labour and management, shortage of materials and longer lead times, delay in response due to remote working, cost of precautionary measures on the site and delayed response from authorities, among others.
“We would anticipate that tender pricing would increase due to contractors pricing in risk to cover a prolonged program due to logistical difficulties and management/ labour restrictions,” Flanagan said.
In about two to six months, if the virus is under control, the impact is expected to ease, along with the loosening of restrictions relating to materials and increased competition from contractors.
“However, there will be a backlog, which may increase materials cost,” added Flanagan.
If the virus is contained globally within the next six months, Flanagan said they expect tender prices to be lower than the last quarter of 2019 with increased tender competition, lower overhead costs and easing of externally sourced materials backlog.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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