Abu Dhabi remains on top despite fall in contract awards

07 November 2012

No major contract awards in the UAE during the third quarter

Abu Dhabi remained the most active construction market in the UAE, despite a sharp fall in the total value of contract awards.

The $1.36bn of deals awarded in the emirate is 73 per cent less than the $4.989bn of contracts awarded in the previous quarter. The fall can be attributed to the award of the $2.85bn contract to build the midfield terminal at Abu Dhabi International airport during the second quarter. If this contract is removed from the second quarter figures, the drop is just 40 per cent.

The drop would have been bigger without a string of awards valued at more than $100m. Two of the contracts were for work on the Ghayathi City development in the Western Region. The first deal, valued at $250m, went to the local Dhabi Contracting. The second, valued at $150m, was awarded to the local National Transport Contracting Company. The other awards were a $100m win for Germany’s Ed Zueblin for the construction of a naval base at Ghantoot, a $130m award to the UK’s Wates to build schools in Al-Ain and a $200m contract awarded to Geneva-registered Archirodon for site preparation works at the Sarb field.

Like Abu Dhabi, the value of awards in Dubai also fell significantly. During the third quarter, the emirate awarded $670m of contract awards, 59 per cent less than the $1.65bn that were awarded during the second quarter. There were only two deals that were valued at more than $100m. The local Ali & Sons secured an estimated $150m contract to build a residential tower for local Juma al-Majid and the local Al-Naboodah Contracting won an order valued at about $100m for a police forensics laboratory.

The disappointing performance of the two emirates highlights the importance of major contract awards to the market at present. In the past, there were a large number of medium-sized contracts awarded by the private sector in both emirates, which meant that large government-backed deals did not have such a big impact on the market.

Today, although some confidence is returning to the private sector, the state remains the dominant player, meaning that large government projects have a major impact on the fortunes of the market.

This has implications for contractors. For international firms, there are still big projects to work on in the UAE, but there are less of them. This will make it difficult to build a long-term sustainable business working on the large-scale projects that the market became accustomed to before the real estate crash of late 2008. If the market does not award more major contracts in 2013, then firms will be forced to review their operations in the country.

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