UAE construction predicted to return to full capacity

Market is now more stable, with Abu Dhabi and Dubai dominating

The UAE construction market will return to full capacity, an EC Harris report has said.

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UAE’s construction market is predicted to return to full capacity, having ‘right-sized’ for the last two years, a report by EC Harris has found.

Titled ‘International Focus on United Arab Emirates’, the report takes into account the UAE’s estimated real gross domestic product growth, thriving industry sectors such as leisure and tourism, ability to raise debt funding, investment in major pipeline construction projects and construction tender price levels.

“After the high and lows of recent years, the UAE construction market is now more stable, although the key construction markets of Abu Dhabi and Dubai are at differing stages of the cycle,” explained Chris Seymour, head of Property for UAE at EC Harris.

“High quality, well designed and well located developments remain in demand and the focus is increasingly on revenue generating developments. Although this may sound like an obvious condition, it has not always been the case,” he added.

EC Harris’s tender price index shows that UAE construction tender prices fell by 3% during 2011, remained at the same level through 2012 and are unlikely to rise by more than 2% during 2013.

Abu Dhabi and Dubai are dominating this growth and confidence, setting the pace for the UAE construction market as a whole. Abu Dhabi has made a huge investment in energy and infrastructure as part of its 2030 Vision, and Dubai has become a prime location as a hub for trade and tourism.

Demand in real estate and infrastructure is being fuelled by expansion and urbanisation in both emirates through a relatively young and growing population, the report said.

Looking forward, the report finds that one of the key challenges facing the UAE is the availability of resources that construction projects rely on. With both Qatar and Saudi Arabia investing heavily in infrastructure, the UAE will have to compete with these markets for construction commodities.

“With the recovery of the markets taking place in the UAE, developers are recognising that there is a window of opportunity to maximise the benefit of the downturn in construction costs. However, the usual caveats apply to purely selecting on cheapest price and the truth of “buy now, pay later” will become apparent as claims and insolvencies gather pace from the supply chain,” Seymour said.

“Companies that take a more sustainable approach to people and resource management will ultimately succeed as the recovery takes place,” he added.


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