Contractors hope for more construction awards in 2013

04 February 2013

GCC countries expected to move ahead with major social, transport and real estate schemes

The GCC construction industry failed to live up to expectations in 2012. A change in leadership at the Interior Ministry stalled decision-making in Saudi Arabia, and in Qatar the 2022 football World Cup-related construction boom has been slow to get under way. Elsewhere, the $10bn in aid pledged to Bahrain and Oman in the wake of 2011’s social unrest did not lead to a slew of project awards as hoped.

Dubai’s revival

The story of the year was the revival of Dubai’s construction industry, following the 2008 property market crash. Projects are once more being tendered, abandoned construction sites are stirring back into life and real estate prices are rising. The government has drawn up a revised development framework, which will shape the emirate in the future, and its debt obligations are being met as they arise, boosting sentiment.

Abu Dhabi has also undergone a period of consolidation. The government has reassessed its spending plans and decided which construction projects to prioritise. Approval was given for major projects such as the midfield terminal at Abu Dhabi International airport, along with new roads, hospitals and housing. It also approved the budget for more consultancy work on the capital’s proposed metro and tram networks, and a budget and delivery dates for the new museums planned for Saadiyat Island.

The $31.7bn of contracts awarded in 2012 was down 12 per cent on the $36.2bn awarded in 2011, according to regional projects tracker MEED Projects. Many hope this will increase in 2013. Contractors are currently tendering or prequalifying for $13bn of construction deals and several projects are years behind schedule. A key scheme in the months ahead will be Saadiyat Island’s $1bn Louvre museum. If this is awarded, it will provide the best indication yet that Abu Dhabi’s construction sector is back in business.

The Louvre is one of the highest profile projects planned for the UAE capital, but it has suffered repeated setbacks and has been tendered twice since its launch in 2007. It was tendered in 2009 as a design-and-build scheme and then again in 2010 as a traditional contract. That tender was cancelled after Abu Dhabi’s Tourism Development & Investment Company shortlisted two contractors in early 2011. Bids for the deal were submitted in mid-November.

Largest regional projects under bid and scheduled to be awarded in 2013
Project CountryEstimated cost ($m)
Saudi housing project: phase 1Housing MinistrySaudi Arabia11,000
Riyadh security forces medical complexInterior MinistrySaudi Arabia3,350
Jeddah security forces medical complexInterior MinistrySaudi Arabia3,350
Diar al-Muharraq mixed-use development: phase 1KFHBahrain3,200
Tameer Towers: Shams Abu Dhabi - Al-Reem IslandTameer HoldingUAE1,900
Msheireb: phase 3Msheireb PropertiesQatar1,872
Dilmunia Health IslandIDCBahrain1,600
Saudi  housing project – phase 1: Riyadh (7,000 units)Housing MinistrySaudi Arabia1,500
Jeddah city development: Jeddah Gate – Abraj al-Hilal phase 2EMESaudi Arabia1,300
Meydan City: Hadaeq Sheikh Mohammed bin Rashid SchemeMeydanUAE1,089
Source: MEED Projects 

Saudi Arabia, meanwhile, has about $30bn of construction projects at the tender or prequalification phase. Much of this figure relates to the security compound projects planned by the Interior Ministry, which has emerged as the kingdom’s biggest construction client. They involve the construction of 28 different types of facilities at more than 50 locations to house, educate and train members of the public security and civil defence services, police, passports division and special security and investigative forces. Bids were submitted in July 2011 and May 2012 for the third and fourth phases respectively of the $10bn scheme, but awards have yet to be made.

Firms are also waiting for awards on the Interior Ministry’s proposed Security Forces Medical Cities in Riyadh and Jeddah, estimated to be worth SR25bn ($6.6bn). Industry sources in the kingdom say the Interior Ministry’s construction programme was affected by the death in June of Prince Nayef bin Abdulaziz al-Saud, who had led the ministry since 1975.

Leadership changes

King Abdullah bin Abdulaziz al-Saud was quick to appoint Prince Ahmed bin Abdulaziz, Prince Nayef’s brother, as the new interior minister, but he lasted just five months in the job, before being replaced by Prince Mohammed bin Nayef. The change in leadership is thought have slowed decision-making at the ministry.

Hopes are that the ministry will resume making awards in the year ahead. Many of the other schemes in the tendering phase are education projects for the Higher Education Ministry or hospitals planned by the Health Ministry.

Hospital building is also driving construction activity in Kuwait, Iraq and Oman. Kuwait is progressing with plans to construct nine hospitals by 2016. Several are under construction and others are expected to be awarded in 2013. The Public Works Ministry is evaluating bids to build three facilities worth a combined $1.5bn: Al-Razi Hospital, the Pediatric Hospital and IBN SINA Hospital, as well as the construction of a 600-bed maternity hospital in the Al-Sabah district. The Public Works Ministry is already overseeing the construction of the $1.1bn Jaber al-Ahmed al-Sabah Hospital in Surra.

As Iraq’s reconstruction gets under way, investment is being poured into its healthcare system, with $2.7bn of hospital projects under way and $2bn more planned. Meanwhile, Muscat’s eighth five-year national health plan, which was ratified on 1 January 2011, gave the go-ahead to build two new regional referral hospitals in Muscat and Salalah and several smaller facilities.

The estimated cost of the Muscat facility is RO140m ($364m), while that in Salalah is RO48m. The two hospitals will operate a combined 1,200 beds. The spending plan also includes the construction of hospitals at Al-Suwaiq, Mahout, Sinaw, Dhalkut and Muzyunah, at a total of RO55.5m. In addition, RO10m has been allocated to upgrade the Samail hospital, along with RO8m for the construction of health centres in Oman.

The big awards in 2013, however, are likely to be in Qatar. Doha has to accelerate the pace of awards if it is to meet its commitments to host the 2022 football World Cup. It has promised to deliver metro and rail networks, nine stadiums and 90,000 hotel rooms, and needs to complete its Lusail real estate project and the regeneration of central Doha.

Phases 3 and 4 of the QR20bn ($5.5bn) Msheireb Downtown project in Doha are set to be signed next year. Local developer Msheireb Properties has set a submission date of 14 January 2013 for the technical bids and 4 February for the financial submissions for phase 3. The third phase of the project will include the construction of 14 buildings covering 148,800 square metres. The buildings will consist of a 192-room hotel, office tower, mosque, health centre and 10 residential units.

The 750,000-sq-m Msheireb development is one of the largest real estate schemes in the capital. It also includes an interchange for Doha’s proposed metro system. The project is set to be completed in five phases through to 2016.

Several sports facilities and hotel projects should also move forwards in Qatar next year. The 2022 Supreme Committee is expected to tender a $287m stadium at Education City, which will be the flagship sporting venue. 

Thousands of hotel rooms need to be built in Qatar before 2022 to accommodate spectators and competitors. As part of this effort, state-backed Katara Hospitality will award the construction of its Lusail Marina Iconic hotel project in the early part of next year.

Other hotels due to be tendered or awarded in 2013 include Hotel Missoni, Premier Inn Hotel at Education City and the Mgallery boutique hotel. Another major project to be tendered in 2013 is the $3.5bn Sidra Golf Residential Development at Lusail. The UAE’s Diar Consult was awarded the masterplanning and conceptual architectural design for the scheme in February 2012. 

Doha metro

Perhaps the most eagerly awaited awards will be the construction packages on the Doha metro.

Bids are currently being evaluated to build the first four line packages for the Red Line North, Red Line South, Green Line and the Golden Line, and the two major terminals planned for the Msheireb Downtown Doha development and Education City.

With just nine years remaining until it hosts the Fifa World Cup, the clock is ticking for Qatar.

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