Clients have stopped inviting firms to bid for new projects, contract awards are being revoked and designers are being told to redesign their schemes. All this would have been unthinkable in the Gulf six months ago, but it is now the reality.
Dubai’s many residential towers and mixed-used complexes have been hit the hardest, thanks to plummeting demand. Sales have dried up as investors find themselves unable to raise finance to make speculative purchases.
Industry analysts predict that many real estate firms will go out of business this year as a result. The most at-risk firms are thought to be those that have not accessed the corporate bond markets over the past two years. The prospects for new bond issues are likely to remain limited until late 2009 at best, removing this as a financing option for the foreseeable future.
Contractors are also being squeezed by the lack of credit. The combination of high borrowing costs and falling prices is putting them in a tough position as clients demand lower prices be passed on to them.
One possibility is for firms to relocate staff to more buoyant markets. Many are pinning their hopes on Abu Dhabi, Doha and Riyadh. However, there will not be enough employment for everyone and some will inevitably have to cut costs through redundancies.