Access to low-cost labour and energy
Doha and Dubai are relatively cheap places to build compared to other global cities, according to the International Construction Cost Index published by Arcadis.
The index, which analyses the relative cost of construction across 44 major cities, found that the local labour markets and resource availability have positively benefitted the GCC. It also underlines the impact of strong currency performance and the fall in oil prices.
Regionally, the Qatari capital is the most expensive city for construction in the Middle East, followed by Jeddah and Dubai, respectively.
“Throughout 2015, the global construction market saw the overall level of cost inflation restricted due to the drops in commodity prices. Particularly when it comes to oil, growing uncertainty over prices will inevitably have a short to medium term impact on the GCC construction industry,” said Ian Williamson, buildings global business leader at Arcadis in the Middle East.
The region’s major commercial hubs of Doha and Dubai are – for the time being – relatively stable locations for developers, benefitting from access to inexpensive labour and energy, Williamson added.
Over the next ten years, Qatar looks set to spend $150 billion in Doha on roads, railways, stadiums and ports, as well as hospitality and social infrastructure, Arcadis said in a statement. The country also has plans for further investment in transport, water and electricity infrastructure by 2020.
Dubai’s airport has surpassed London Heathrow as the busiest airport in the world, and the emirate is expected to enjoy significant economic benefits from Expo 2020. While oil is not a major part of its economy, uncertainty associated with low oil prices and falling commodity markets can still have a big impact on Dubai’s construction market. This, combined with falling real estate values, is leading to some uncertainty, Arcadis said in its report.
The year ahead looks to be challenging for the construction industry in the region, Williamson noted. “With the steep fall in the price of oil, the timing of investment programs across the Middle East has become uncertain. Declining commodity prices, low labour rates and a highly competitive Middle East construction market have given rise to more potential opportunities across newly-affordable markets.”
“It is a good time for government, funders and developers to capitalise on their investment ambitions.”
The findings in the report provide an average price bracket for 13 different types of building in each location, including residential, commercial and public sector developments. The index is based on construction costs only and excludes land and finance. Costs are calculated based on estimates made by Arcadis cost management experts worldwide and take into account the likes of currency values, commodity prices, local labour markets and resource availability.
Of the 44 cities surveyed, New York, London and Hong Kong rank the most expensive for construction at the first, second and third position respectively. Bangkok, Bangalore and Taipei are the three least expensive cities, ranking 42, 43 and 44. Doha, Jeddah and Dubai rank 12, 16 and 18th respectively on the list.