Sharjah has long provided an attractive residential and business alternative to neighbouring Dubai, offering lower rental charges and living costs combined with more open space and a slower pace of life. This demand for housing and business space has helped fuel Sharjah’s building industry over the last few years.
However, with Dubai’s economy slowing sharply this year, it has been inevitable that some of the knock-on effects have been felt in neighbouring Sharjah, and particularly so in the construction sector.
According to a report issued in early November by investment bank HC Brokerage, Dubai’s rental costs have fallen by as much as 50% from their peak in 2008. The report added that, “Former Dubai residents driven away by high rentals are returning to the emirate. A similar trend was observed during the 2001 crisis, as rent in Dubai dropped to more attractive levels.”
In turn, the report says this has meant that the impetus for development in the Northern Emirates, such as Sharjah and Ajman, has fallen away.
Other experts also expect Dubai’s residential market to favour renters over owners, with real estate consultancy CB Richard Ellis predicting that Dubai rental rates were expected to fall further in the fourth quarter and vacancy ratios were expected to increase, while Colliers International estimated that 25% of residential properties in the emirate were currently empty.
None of this is particularly welcome news for Sharjah and its construction sector, with weaker demand for office space or accommodation reducing the call for new construction projects in the shorter term. However, it is not all doom and gloom, with a predicted return to growth for Dubai in the coming year, which could help stimulate more activity for Sharjah’s builders.
Though the tide of demand for new residential and office projects may be on the ebb now, there could be an increased flow into new tourism developments. The emirate is looking to increase its hotel room inventory by 50% by the year 2012, in order to cater to the expected growth in the tourism sector, Sheikh Sultan Bin Ahmad Al Qasimi, the chairman of the Sharjah Commerce and Tourism Development Authority (SCTDA), told local press on November 9.
“Our aim is to grow the tourism sector by 5-10% annually for the next few years,” he said. “Although we currently have just the right number of hotels and hotel rooms, we need to have more in the future. Hence, the new investment will help the industry go forward.”
Not only is Sharjah’s hotel stock likely to be expanded – there are also plans to increase the range of tourism attractions across the emirate. Marwan J Al Sarkal, the chief executive of the Sharjah Investment and Development Authority (SIDA), said in early November that talks had been initiated with lenders to raise funds through an Islamic financial instrument to back up to $2.7bn worth of tourism developments.
While few details of the schemes to be developed have been released, $2.7bn worth of projects in the offing can only bolster the construction sector’s confidence.
Another boost for the building sector, again stemming from the tourism industry, will be the construction of a new runway at Sharjah International Airport, and a proposal to build a new terminal to handle the increasing number of visitors. Airport authorities said the tender for the 4000-metre-long runway would be called early next year, with the project set to be completed by 2012.
The new terminal will soon be a matter of urgency, according to Ali Salim Al Midfa, director of the Sharjah Airport Authority, with the passenger-handling capacity of the existing facility expected to reach capacity in a few years.
“The airport’s passenger traffic is growing at 10% year-on-year, even under the current economic situation,” he told local media on November 13. “We have two to three years’ time before the airport becomes too congested.”
With some big-ticket projects coming up and investment in the tourism industry set to rise next year, demand in Sharjah’s construction sector should heat up quickly in 2010, while the residential and business segments of the building trade should see a more gradual upturn.
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