In early November, Lebanese Company for the Development and Reconstruction of Beirut (Solidere) invited selected contractors in the UAE to prequalify for a contract to build an upscale resort at its Al-Zorah development in the emirate of Ajman.

The invitation surprised companies as little had been heard on the project since ground was broken on the AED220bn ($60bn) masterplan development in May 2008. At the time, the project was among the most high-profile in the UAE, with advertisements featuring Egyptian actor Omar Sharif airing on CNN and other international channels. Since then, the scheme, like many others in the Northern Emirates, has stalled after property prices fell and investors lost interest.

A report by the US’ CB Richard Ellis in 2010 revealed that rents and prices across the Northern Emirates fell dramatically following the real estate slump that began in late 2008.

The northern emirates were affected by the overall slump in the property sector, and the reemergence of Dubai as an affordable location for rentals. Sharjah was the worst affected, with a 50 per cent fall in prices. Ajman suffered a 42 per cent decline, while Umm al-Quwain fell 39 per cent, Ras al-Khaimah 28 per cent and Fujairah 23 per cent.

Real estate outlook brightens

The invitation for prequalification for work at Al-Zorah is the latest sign that after four years of waiting, the outlook for the real estate sector in the northern emirates is improving.

Al-Zorah ranks as the largest project ever planned in Ajman. Developed by a joint venture of the Ajman government and Solidere, the development will be built along Ajman’s beachfront and creek. It will cover an area of 12 square kilometres, with a built-up area of 22 million square metres, and 16km of beachfront. It has been designed as a self-contained city consisting of a variety of residential buildings, offices, shops, schools, hospitals and leisure facilities. The project will also include marinas and a number of five-star resorts.

The situation is generally improving [in Ras al-Khaimah]. Clients are [showing interest] in our properties now

Mohamed Sultan al-Qadi, RAK Properties

More construction work in Ajman is certainly required. Since 2008, the volume of construction work awarded in the emirate has shrunk significantly. In 2008, there were $1.9bn of construction and infrastructure projects awarded, according to regional projects tracker MEED Projects. In 2009, that figure fell to $523m, before bottoming out at $50m in 2010. Last year, there were $613m of awards and so far this year there has been $150m.

The drop in the value of awards is a result of developers delaying major real estate projects. Today, there are just over $28bn-worth of projects on hold. If these schemes can follow Al-Zorah’s lead and begin moving forward again, Ajman’s construction market may return to its pre-2008 state.

Another northern emirate that was affected by the real estate crash is Ras al-Khaimah. Like Ajman, it was working on a series of major real estate ventures and since 2008, the pace of development has slowed, as developers focused on delivering projects already under construction. “The golden days have gone,” says Mohamed Sultan al-Qadi, chief executive officer at the local RAK Properties. “The market has slowed and companies are struggling. RAK Properties was affected, but we were able to continue working on our existing projects, and we had to be conservative when managing financial issues.”

However, there are signs that confidence is returning in Ras al-Khaimah. “The situation is generally improving,” says Al-Qadi. “Clients are [showing interest] in our properties now. It’s not as big as it used to be, but the signs are good.”

In March this year, the RAK Marjan Island Football Investment Fund and Spanish football club Real Madrid announced plans to build an AED3.67bn, 430,000-sq-m sports scheme on the emirate’s Al-Marjan Island Development.

Known as the The Real Madrid Resort Island, it will include a 10,000-seat stadium, associated sports facilities, club museum, shopping mall, five-star hotel, villas and private beaches. The project is a welcome boost to the island development, which has suffered from slow progress in recent years.

The island is being developed by Ras al-Khaimah Investment Authority (Rakia) and is the first man-made island in the Northern Emirates. Land reclamation on the project was completed in 2009 and the island covers a total area of 2.7 million sq m. Projects on the island such as Khoie Properties’ La Hoya Bay Development have suffered high-profile delays.

Government support for real estate sector

Ras al-Khaimah’s real estate sector is supported by government infrastructure. Much of the investment comes from the federal government. In 2008, UAE President Sheikh Khalifa bin Zayed al-Nahyan allocated AED16bn for infrastructure projects in the Northern Emirates. The funds are being spent on improving roads, sewage and drainage systems, and building schools and hospitals.

The modest level of construction activity in the northern UAE is now creating opportunities for contractors

The opening of Emirates road in 2005 meant Ras al-Khaimah was about an hour’s drive from Dubai International airport – which is now one of the busiest airports in the world – helping to develop the business case for property development in the emirate. Since then, there have been further investments in road infrastructure in Ras al-Khaimah to help catalyse more development. The most recent road project to have been launched is a new $100m ring road contract that was awarded to Saudi Arabia’s Al-Rajhi Contracting.

Airport development

Ras al-Khaimah’s international airport has also been identified as a driver for growth. The airport has positioned itself as an alternative entry point into the UAE, alleviating some of the pressure from the two main international airports in Dubai and Abu Dhabi.

Traffic volumes are rising at Ras al-Khaimah International. At the end of 2011, German charter flights began using the airport, and with 67 per cent growth in passenger volume in the first half of 2012 compared with the same period last year, and 25 per cent annual growth forecast for the next four years, expansion plans are being prepared.

The overhaul, which will increase capacity by 40-50 per cent, will involve the demolition of the VIP terminal and the linking and expansion of the remaining terminals. The designs for the expansion have been drawn up and funding options are being considered. It is estimated construction will be completed within the next two years.

Although not as visible, power capacity is also being developed to support the new residential developments. In early October, the local Utico Middle East and China’s Shanghai Electric signed an agreement to build a 270MW coal-fired power plant in Ras al-Khaimah. The $408m project ranks as the first clean coal power plant in the GCC.

Investments are also being made in Fujairah as the emirate continues to leverage its strong links with Abu Dhabi and its ideal geographical location on the Arabian Sea. In July, Abu Dhabi began operation of the 370km Habshan-to-Fujairah pipeline, which can transport 1.5 million barrels of oil a day. Since then, a further $20bn of oil and gas projects have been planned for Fujairah, including a new liquefied natural gas terminal.

These projects are attracting investments in other schemes in the emirate, most notably hotels. In November this year, Abu Dhabi-based developer Al-Ain Properties invited companies to bid for a contract to build an estimated AED200m five-star resort located close to the Le Meridien Al-Aqah beach resort in the north of Fujairah. The project will follow an earlier award made by Dubai-based developer Elwan Group in 2011 to Italian contractor Impresa Pizzarotti for the estimated $122m contract to build a hotel.

Dubai crucial

While the level of construction activity in the northern emirates remains modest, it is starting to create new opportunities for investors and construction companies. What happens next in Dubai will be crucial.

The announcement last week of the multibillion-dollar Mohammad bin Rashid City project in the emirate should bring further confidence to a market that is in the early stages of recovery. If construction activity in Dubai continues to improve, then developers in the northern emirates will find the confidence to move ahead with their own projects.