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Northern Emireates

The Khor Fakkan Resort ... old-style luxury.

In quiet mode

Projects to develop the Northern Emirates’ infrastructure and tourism facilities are expected to keep the construction sector ticking over in the absence of an investment boom, says Mridula Bhattacharya

01 November 2011

THE construction sector in the Northern Emirates continues to face a host of challenges amidst a weakened economic and investment climate. While no new projects have been announced, the ones under way have witnessed a slow pace of development and extended handover dates.

The demand for housing in the Northern Emirates has also declined due to excess supply and competition from Dubai. Before the worldwide economic recession hit the market and before the downturn in Dubai, people were opting to live in Sharjah to benefit from the lower rents. However, as the rents continue to fall in Dubai, there is a definite move back to the emirate, with Sharjah and Ajman, in particular, being most affected.

According to a report by real estate consultancy Asteco, owners of old buildings in the Northern Emirates are finding it difficult to retain tenants, as more and more residents are moving or upgrading to new buildings.

An increasing inventory of new towers is also affecting the market, with growing occupier movement away from ageing buildings that lack sufficient amenities and facilities. Prime properties set to enter the market over the next 12 months include the Al Ghanem Business Centre Tower, which is located in the Al Majaz area in Sharjah.

Ajman has seen an increase in supply of both residential and office spaces with the handover of various new projects including Falcon Towers. The project comprises 840 apartments spread over seven residential towers as well as one office tower.

New developments are also being handed over in Fujairah and Ras Al Khaimah, which will ultimately result in people relocating to the newer buildings and will have an adverse effect on rental rates in mature projects.

Heart of Sharjah... aims to revitalise and preserve the emirate’s heritage area.

There has been a five per cent decline in rents in the third quarter of this year compared to the second quarter as tenants moved to new buildings with better facilities within the emirates or to Dubai.

The office sector in the Northern Emirates too is facing challenges as supply continues to exceed demand. The sector witnessed declines of six per cent on average since the second quarter of this year. The decline, according Asteco, is also due to businesses relocating to new developments in more popular areas within Sharjah or opening offices in Dubai, which is more convenient and requires less paper work, the report said.

However, office space within free zones continued to attract companies setting up base to take advantage of the benefits offered by these zones.

While construction activity has remained subdued, efforts are being made to entice investment into the Northern Emirates and encourage companies to set up businesses there. Ras Al Khaimah Free Zone has reported increase in the number of business licences this year over last year. In Sharjah, the number of new and renewed licences issued by the emirate in 2010 grew by 7.1 per cent and a similar figure is expected in 2011, according to the Sharjah Economic Development Department (SEDD).

Meanwhile, the UAE government earlier this year committed significant funds towards key infrastructure projects in the Northern Emirates. A total of Dh5.7 billion ($1.55 billion) over the next five years has been allocated towards alleviating persistent problems such as power shortages.

Power & water

A majority of the investment will be utilised towards increasing the production capacity of electricity and water facilities.
One of these projects include the construction of a 100-km main water pipeline from Kalba, at the southern end of the UAE’s east coast, to Dibba in the north, passing through the cities of Fujairah and Khor Fakkan. Estimated to cost Dh900 million ($245 million), the pipeline will supply 23 million gallons per day (gpd) of water to Fujairah, five million gpd to Khor Fakkan, Dibba and Kalba and three million gpd to Dhadnah.

Another 60-km pipeline, costing Dh300 million ($81.74 million), will be built to supply 18 million gpd of water to Umm Al Quwain. The water will be supplied from Abu Dhabi Water and Electricity Authority (Adwea) power and desalination plants in Fujairah.

Another utility order for Sharjah provides for the supply by Adwea of 700 MW of electricity, construction of a new 400 kV main transmission station, costing Dh500 million ($136 million), and for the supply of an additional 10 million gpd of water to meet local requirements.

Adwea has so far invested around Dh4 billion ($1.09 billion) in the development of its power grid in the Northern Emirates. It has also constructed two water desalination and power generation projects in Fujairah at the cost of Dh16 billion ($4.37 billion), through joint ventures with companies from Japan, Singapore and the UK.

Its joint venture with Singapore’s Sembcorp – Emirates Sembcorp Water & Power Company – is reported to have called for bids to expand Fujairah F1 independent water and power project. The winning prequalified bidder will design and build a 30 to 35 million gpd reverse-osmosis seawater desalination project and operate it for seven years after construction. The project will stand next to the existing plant.

Among other projects in this sector, Belhasa Projects is building a water transmission network in Umm Al Quwain under a Dh60-million ($16.3 million) contract awarded by the UAE’s Federal Electricity and Water Authority (Fewa). The water transmission network, which will surround the city and run a total of 30 km, will comprise a series of water distribution pipes that are between 600 and 800 mm in diameter.

Roads

Road and other transport infrastructure projects are also to see further investment with a number of major road works already under way. This includes expansion work on the Emirates Road and development of the Zorah-Al Helio Road.
The UAE’s Ministry of Public Works is currently renovating five interchanges on Emirates Road between Dubai and Ajman at a cost of Dh1 billion ($272 million), according to newspaper reports. The project, scheduled for completion by mid-2013, comprises three phases and includes the addition of two more lanes in both directions of the road as well as the construction of a storm water drainage network around the area.

Tourism & leisure facilities

The Sharjah Investment and Development Authority (Shurooq) is focusing on developing the tourism and investment markets through real estate projects.

A major project being developed by Shurooq scheme is the ‘Heart of Sharjah’ restoration project, which aims to revitalise and preserve the heritage area in the heart of Sharjah. This will be the region’s biggest heritage project and will provide a Grand Souk, a 50-bedroom boutique hotel, museums and art galleries, a waterfront promenade and various food and beverage outlets showcasing the cuisine from around the region.

The project, which was launched in 2010, will be completed in 2025 and involves a major transformation, including the inclusion of retail elements to add commercial value to the development.

Shurooq is also developing the Dh350-million ($95.4 million) Khor Fakkan Resort, a major five-star mountain resort boasting sea-facing views. Designed in an old city style, the 170-room development will feature all the amenities of a modern resort.

Another major Shurooq project under way is Al Majaz Waterfont development, which aims to transform the Khalid Lagoon and the waterfront on the Al Buhaira Corniche into a key attraction for the emirate. The project follows the success of the Al Qasba development. Due to open at the end of the year, the project is aimed to provide a much-needed focal point for social and cultural activities (see separate article).

Ras Al Khaimah too is investing millions of dollars in hotels and other infrastructure projects over the next four years with the aim of quadrupling its tourism footfall. Further infrastructural and tourism developments, including the growing number of malls as well as the creek and mountain developments have enhanced Ras Al Khaimah’s restaurants and hospitality options.

According to recent reports, there are 14 hotel projects under construction in the emirate. Visitor numbers to Ras Al Khaimah are also steadily increasing as the industry and government work in tandem to promote the emirate as a destination globally, attracting niche segments like adventure and cultural tourists and the Mice industry.

The emirate is also getting a boost from local carrier RAK Airways, which relaunched late last year.

Among the hotels that have recently opened in the emirate is the Double Tree by Hilton RAK – which is the Hilton Hotels & Resorts brand’s third property in Ras Al Khaimah. Hilton’s roster of hotels in the emirate will continue to expand in the future, as it recently signed an agreement to take over the management of the Al Hamra Fort Hotel, which will open under the brand in the first quarter of 2013. The chain also has another two hotels in the pipeline: the Waldorf Astoria, which is scheduled to open in the first half of 2012, and Hilton Mina Al Arab, which will open in 2013. The opening of the Waldorf Astoria in Ras Al Khaimah will mark the first time that the luxury brand will be offered in the UAE.

Meanwhile, work on Fujairah’s Mina Al Fajer Resort development has entered its final phase with the launch of work on the five-star hotel on the project.

Mina Al Fajer Real Estate has awarded the construction contract for the Fairmont Hotel project to Intermass Engineering and Contracting Company. Located at the foot of the Hajar Mountains, the 777,025-sq-ft mixed-use project also includes a marina, sea-facing mountain villas and luxury apartments (see separate article).

Commercial projects

Despite widespread market negativity, a number of projects are being completed and handed over including those along the Emirates Road such as Ajman One, Ajman Pearl and the remaining components of the Garden City development.

Sweet Homes Holdings has started handing over the Dh507-million ($138.1-million) Falcon Towers project to investors. Located in the heart of Ajman, the eight-tower project consists of seven residential towers and one office tower.

RAK Properties has completed Ras Al Khaimah’s tallest towers – Julphar Towers and handed over the commercial and residential units to investors.

The project comprises two 43-storey towers with top-of-the-range facilities and amenities. The residential tower boasts 349 apartments varying from studios to deluxe four-bedroom units as well as duplexes on the upper floors, while the office tower features 468 offices of various sizes to meet differing work requirements.

RAK Properties handed over 214 beachfront villas in Mina Al Arab to their owners last month. The developer announced earlier this year that it would complete 2,050 units – including apartments, villas and offices – within the Mina Al Arab project and will hand over these units before the end of this year (see UAE Focus).

Meanwhile Al Futtaim (MAF) Properties, the developer of well-known shopping malls such as Deira City Centre and Mall of the Emirates, has formed Sharjah Holding in partnership with the Sharjah government to introduce a new concept called the Matajer neighbourhood shopping mall.

The first Matajer centre was recently opened in Al Quoz area of Sharjah. Sharjah Holding aims to have three more such malls operational by the middle of next year (see separate article).

Sharjah Holding is also developing an integrated mixed-use community near Sharjah University City.

Majid Al Futtaim is developing Fujairah City Centre in partnership with the government-owned Fujairah Investment Establishment. Offering a gross leasable area of 34,000 sq m, the mall is scheduled for opening early next year (see separate article).

Among other developments, the Sahara Mall in Sharjah is undergoing an expansion, due for completion later this year, which will increase its retail area by more than 50 per cent.

Also due for completion by the end of this year in Sharjah is a Dh150-million ($40.87-million) entertainment complex, complete with its own ski slope, which is rising from the ashes of the Hazana market that burnt down three years ago.
Al Shaab Village project has a 800-sq-m ski slope, billiards hall, 240-stall exhibition centre, health club, and food court as well as a cultural centre for heritage research featuring a library.

Conclusion

Attempts are being made to address the downturn in the market and boost the infrastructure in the Northern Emirates. Ajman, for example, is attempting to resolve some of the issues in the real estate market and looking at amending some of its real estate laws/regulations.

Ajman Real Estate Regulatory Agency (Arra) is planning to make public the list of cancelled projects and will also release a progress report on projects under construction by the end of the year, according to Emirates24|7 daily. The regulatory agency’s website currently lists 156 projects.

To ensure that real estate projects do get completed, Arra is planning to help developers secure bank funding, according to the newspaper, which indicated that property prices in Ajman have fallen by 20 per cent in 2011 compared to last year.

A key project on the cards that could provide impetus to growth in the Northern Emirates is the 1,200-km Etihad freight rail line connecting all seven emirates, their ports and factories. A third line from Dubai to the five northern emirates could prove to be a much-needed boost to these emirates in the long term.