Construction sector optimism limited to the GCC

19 December 2013

Government spending and a resurgent real estate sector are driving a new building boom

The prospects for the region’s construction sector in 2014 will be mixed. In the Gulf, the market will be busy as governments continue to invest in infrastructure and a resurgent private sector moves forwards with real estate projects. For the rest of the region, the market will be subdued as it continues to digest the economic and political upheaval of the past five years.

The top 10 biggest contracts set to be awarded next year are all in the GCC, demonstrating the importance of the six-country bloc to the region’s construction companies. The four main areas covered by the upcoming awards are leisure facilities, real estate, hospitals and cultural centres.

Dubai recovery

For those who endured the downturn in 2008 and 2009, it will come as a surprise that the largest construction contract expected to be awarded in 2014 is in Dubai. Over the past two years, the emirate’s fortunes have been revived as confidence returns to the property market and developers, led by government-controlled companies, move ahead with major new projects. These schemes are not just aimed at delivering new homes; they will also create new attractions for residents and visitors to Dubai.

Some 25 million people are expected to visit the Expo… 70 per cent of these will come from outside the UAE

The largest contract award expected next year is for the construction of the Jebel Ali Themed Entertainment Development. The project is one of the initiatives announced by Dubai ruler Sheikh Mohammed bin Rashid al-Maktoum over the past year, aimed at creating new entertainment attractions and real estate opportunities and rekindling the construction sector.

Launched in November 2012, the estimated $2.72bn scheme involves building five theme parks to help promote tourism in the emirate. The theme parks include Dubai Adventure Studios, a water and marine life park, a Bollywood park, a children’s theme park and a night safari park.

Some construction work on the project has already started. The local Khansaheb Civil Engineering has been working on an early works package and further construction contracts are about to be tendered. Unusually, South Korean contractor Samsung C&T is acting as the client representative and programme manager on behalf of the project’s client, local developer Meraas.

Samsung has worked for Meraas before. It was taken on as the contractor for Meraas’ proposed $95bn Jumeirah Garden City development just before the emirate’s property market collapsed in 2008. That contract was quickly terminated and the project scrapped and, although that was more than five years ago, the memory of how fragile Dubai’s construction market can be is still fresh. Many still harbour doubts over whether the new generation of projects will actually go ahead.

Those concerns will have been allayed significantly by Dubai winning the bid to host the World Expo 2020 on 27 November. The event is expected to be a major catalyst to development in the emirate, with government and private sector clients building new infrastructure and buildings to support the influx of visitors.

Expo catalyst

The Expo will run for six months from October 2020 and some 25 million people are expected to visit the site, which will be developed next to the new Al-Maktoum International airport in the Jebel Ali area. Some 70 per cent of these visitors will come from outside the UAE and will require accommodation and transport links. While Dubai already has many of these facilities in place, additional capacity will need to be built ahead of the event. Dubai’s government estimates that the cost of building the Expo site and the associated infrastructure will be $6.9bn.

The event will also be a catalyst for other projects. It is expected to accelerate development at Al-Maktoum International airport, and will require the Roads & Transport Authority to build additional metro lines, notably an extension to the Red Line running from the Jebel Ali area up to the Expo site and the new airport.

Dubai’s real estate market will also be boosted by the Expo win. This year, several major contracts have been tendered by local developer Emaar Properties, which is moving ahead with a variety of projects across the emirate, including the Downtown Dubai district, home to the world’s tallest building, the Burj Khalifa.

The two main contracts it is currently tendering are for the construction of three towers, as part of the Address Residence Fountain Views development, and an opera house. A contractor was expected to be appointed for the opera house by the end of 2013, but an award could be deferred to 2014, when the contract to build the Fountain Views development is also scheduled to be made.

A further award is expected for the Dubai Mall extension project. The work involves building a fashion avenue next to the existing mall, offering 75,000 square metres of retail space and about 25,000 sq m of parking.

Another Dubai developer set to award a major mall construction contract in 2014 is Nakheel. It is currently tendering the $681m Nakheel Mall project on the Palm Jumeirah. The 418,000-sq-m shopping, dining and entertainment centre will be built over five levels with more than 100,000 sq m of retail space.

Meanwhile, Dubai-based hotel operator Jumeirah Group is preparing to award the contract to build the fourth phase of the Madinat Jumeirah next year. At least six contractors were invited to submit bids on 5 December for the construction contract, which involves building a 435-room hotel with 400 parking bays, three restaurants, lounges, bars, a business centre, swimming pools and a turtle lagoon.

Doha tender

Real estate developers are also active in Qatar. In Doha, the local Lusail Real Estate Development Company is preparing to tender the contract to build a 550-metre-plus tower at the Doha Convention Centre development. Located on Corniche Street, opposite the Sheraton hotel, the 112-storey, mixed-use tower will have a built-up area of 330,000 sq m and will include a hotel, offices and apartments.

Away from real estate, the healthcare sector will be an important source of work for construction companies in 2014, with major contract awards planned in Kuwait and Saudi Arabia. Kuwait is preparing to award the contract to build the 1,157-bed Al-Jahra hospital. In August, Kuwait’s Burhan International Construction Company submitted the low bid of $1.27bn for the deal.

The scheme is part of a plan to extend nine hospitals to improve the provision of public health services in the country. The expansions will add 5,000 beds to the current capacity of Kuwait’s hospitals. Other medical awards include an annex to Al-Sabah hospital. India’s Shapoorji Pallonji, along with local partner Al-Sager General Trading & Contracting Company, submitted the low bid for the contract in November.

In Saudi Arabia, the two biggest hospital construction awards expected in 2014 are for King Abdullah Medical City and King Khaled Medical City. The tender closing date for King Khaled Medical City was extended to 8 December. The three-year construction contract involves building a major new healthcare facility serving the cities of Jeddah and Mecca in the Western Region of the kingdom. The development will include hospital buildings, research centres, administration buildings and a housing community, with a total built-up area of nearly 1 million sq m.

The King Khaled Medical City project in Dammam is at an earlier stage. Contractors have submitted prequalification entries for the scheme, which involves building a 1,500-bed hospital, a residential complex, a research centre and an international academy.

Cultural schemes

For cultural projects, Kuwait is planning to award construction contracts for two new cultural complexes in the Al-Samiya area. The Amiri Diwan received bids in late November for the construction work on the new centres. The local Al-Hani Construction & Trading Company was the low bidder for each deal, submitting a price of $409.4m for the Abdullah al-Salem centre and $835.3m for the Jaber al-Ahmad centre.

Abu Dhabi could also award construction contracts for major cultural projects in 2014. In early 2013, it awarded the main construction contract for the Louvre Museum to a joint venture of the local Arabtec Construction, Spain’s Constructora San Jose and Oger Abu Dhabi. Since then, it has tendered the Zayed National Museum and has begun the prequalification process for the Guggenheim Museum. These projects could both be awarded next year.

If these major construction contracts are all successfully awarded, and are supplemented by other contract wins across the region, then 2014 could be a return to form for the region’s construction sector. The challenge for the longer term will be transferring that success to the rest of the region.

For now, that is a question for politicians to wrestle with. If they can resolve their issues in 2014, then there is a chance that 2015 and beyond could be a bumper year for the whole region, rather than just the GCC.


The top 10 biggest contracts scheduled to be awarded in the region next year are all in the GCC

Source: MEED

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