Boom-time dreams take shape on eve of Cityscape

As new landmarks rise in Abu Dhabi, developers and investors are preparing to discuss how projects planned in happier days will pan out in today's more challenging market.

If the Cityscape conferences are the barometers of the property market, next week's event in Abu Dhabi should read: cautious optimism.

Many of the ambitious plans announced in 2007 and 2008 are becoming a reality. Evidence of this can be seen on the city's skyline, where new landmarks such as Aldar Properties' Central Market in downtown Abu Dhabi and Sorouh Real Estate's Sun and Sky towers on Reem Island soar. As many as 10,000 residential units are expected to be delivered by the end of the year, which will push rental rates down and allow residents access to a range of higher-end housing that has not previously been available in the capital.

"Abu Dhabi is starting to become more of a realistic proposition," says William Dewsnapp, the head of valuations for the Abu Dhabi office of the property consultancy Cluttons. "These are becoming tangible assets, not just a pipe dream that you see in an image or a model." But the impact of the global financial crisis and the regional property downturn will still weigh heavily on participants in the conference, separate versions of which are held once each year in Abu Dhabi and Dubai. This year's Abu Dhabi Cityscape will run from Sunday until April 21. The discussion forums and panels will focus on the problem of financing construction at a time when sales are limited, and on the need for stronger regulations.

One talk on the first day is entitled "Maximising opportunities in distressed real estate", while on the second day, "Executing successful corporate and debt restructurings" is on the agenda. "We've increased the conference content by five times," says Rohan Marwaha, the managing director of Cityscape. "This has become more of an investor-developer networking event. That's the direction it's going."

There will be 162 speakers this year, compared with fewer than 100 last year, he says. Gone are the days when individual investors stormed the conference to actually buy property, sometimes in bulk. Remember the reality television show Hydra Executives, in which people plunked down hefty deposits on entire floors of buildings after a short conversation with a broker? The biggest exhibitor in the halls of the Abu Dhabi National Exhibition Centre this year will be the Urban Planning Council (UPC), an indicator of the changing make-up of the market. The UPC is in charge of executing Plan Abu Dhabi 2030 and has seen its powers increase in the past two years as it seeks to unite the development companies that have launched major projects across the city.

Some of these projects, such as Reem Island, are encountering challenges as smaller developers have difficulty finding enough money to build their projects. The centrepiece of the UPC's exhibition will be a giant model of the future city of Abu Dhabi, showing what it will look like when all the projects are finished as planned. The model is so large that it was broken into five pieces to be shipped to Abu Dhabi from the UK.

Aabar Investments, the rising star of the Abu Dhabi investment scene, will also have a larger presence this year. The company bought Dh2.7 billion (US$735 million) worth of land in May last year. Less than a year later, it has hired a chief executive of real estate, Ibrahim Eskiocak, and is planning to unveil elements of its proposed nine-building project at Al Raha Beach and 12 towers on Reem Island.

Even with a slow property sales market, Mr Marwaha predicts there will be about 31,000 visitors to the conference this year, compared with about 33,000 last year. The number of exhibitors has dipped to 255 from 265 last year. Mr Marwaha says that international institutional investors are expected to come in larger numbers. Indeed, the conference list includes companies such as Prudential Real Estate Investors from the US and Amiri Capital from the UK.

A major topic of conversation between these potential investors and local developers will be the impact of the thousands of new homes and offices coming on to the market. "People are obviously interested in understanding the new dynamics," Mr Marwaha says. "It's about what's driving the industry now, whether it's pricing or laws or other issues." Analysts predict that many businesses will move out of villas into modern buildings such as the Aldar HQ building near the airport. Well-to-do residents of older buildings in the city centre will start to relocate to the posher homes on Reem Island and Al Raha Beach.

These shifts are likely to lower the rental rates of older buildings and make the price of living in Abu Dhabi more competitive with Dubai, says Matthew Green, the head of research at the property consultancy CB Richard Ellis. "Lease rates will overall come down during 2010," he says. "The new buildings are going to offer up new choices for businesses and residents. Landlords are going to have to start taking notice of this."

Meanwhile, sales prices will stay fairly stable during this period until investors start to feel more comfortable with the properties being delivered, Mr Green says.