Spending on construction projects across the GCC will fall by 28 per cent this year due to a collapse in construction spending in the UAE, according to data from MEED Cost Indices.
In January, construction spending totalled $7.51bn for the six GCC markets. By December, it is forecast for fall to $5.39bn as contractors struggle to find new work and maintain their orderbooks.
The reason for the fall is a collapse in spending in the UAE, which is the region’s largest market for construction spending. In January, spending totalled $3.91bn and it is forecast to fall by 60 per cent by the end of December when $1.575bn will be spent.
The UAE is experiencing the dramatic fall because a raft of existing projects are being completed this year, and not enough new work has been awarded over the past two years to replace it. This year there will be $58.3bn of construction projects completed in the UAE, according to data from regional projects tracker MEED Projects. Since the second half of last year, there has only been $21bn of new contract awards to replace those completed schemes – a shortfall of more than $37bn.
The sharp fall in the UAE means that it will be replaced by Saudi Arabia as the region’s most active market in terms of spending, even though the kingdom’s performance this year is expected to be largely flat at about $1.9bn a month.
The UAE and Saudi Arabia dwarf the other four markets. The monthly spend will be $700m-900m in Qatar, $350m-400m in Kuwait, $170m-210m in Oman, and $150m-190m in Bahrain.
Looking further ahead, there will be a recovery for the UAE in 2013. It will overtake Saudi Arabia as the region’s most active market in February and reach a peak of $2.19bn in June. The boost in spending will come from spending on major contracts that have been awarded this year, notably the work tendered at Dubai International airport and Abu Dhabi International airport this year.
After the June peak, spending in the UAE will decline, and in September will once again be replaced by Saudi Arabia as the region’s most active market, even though Saudi spending in 2013, like 2012, will remain flat at about $1.9bn a month.
The other four markets are all expected to remain flat at below the $1bn a month mark, demonstrating that with the exception of the UAE, spending in the GCC is robust. The surprise for many contractors will be Qatar, which is expected to be a major source of turnover over the coming decade as it prepares to host football’s Fifa World Cup in 2022.