Data reveals bad year for contractors in the UAE

22 December 2011

Abu Dhabi slowdown surprises many as sentiment starts to improve for Dubai

The value of construction and infrastructure contract awards in Dubai and Abu Dhabi fell almost 50 per cent this year. During 2011 there were $11.5bn of contract awards, compared with the $22bn of awards made during 2010.

The slowdown in Abu Dhabi, which is the larger of the two markets, has surprised many this year. Many expected the emirate to repeat its 2010 performance as high oil prices mean it can still afford to invest in infrastructure. Instead government and their associated companies have delayed the award of major contracts, such as the Tourism Development & Investment Company’s Louvre Museum and Mubadala Development Company’s Four Seasons hotel, while tenders, such as the Department of Transport’s Mafraq-Ghuweifat highway and Umlifaina bridge, have been cancelled.

Abu Dhabi and Dubai awards 2011
QuarterAbu DhabiDubai
2011 total8,2063,283
Source: MEED Projects

The delays and cancellations mean that during 2011 clients in Abu Dhabi awarded $8.2bn of contracts, which is 44 per cent less than the $14.7bn of deals awarded in 2010. The decline began at the start of the year. During the first quarter, it awarded $4.6bn of new work, more than it awarded for the following three quarters. The market would have performed even worse had it not been for the award of two major contracts in the fourth quarter, Aldar Properties’ $600m Yas Mall and the Etihad Railway’s $899m first phase construction contract.

Dubai also underperformed in 2011, with a similar decline following an encouraging first quarter when $1.2bn of contracts were awarded. By the end of the year, it had added another $2.1bn of awards to finish on $3.3bn of contracts for the year – 54 per cent less than the $7.2bn awarded in 2010. Although this is a larger decline than Abu Dhabi in percentage terms, it is Abu Dhabi that has been the biggest disappointment as it failed to meet the expectations that many had for it.

Conversely, the sentiment for Dubai has improved, even though data suggests that the market is declining. Since August, the emirate has tendered several major government-backed projects, such as Concourse 4 at Dubai International Airport, the Four Seasons Hotel and the expansion of the Meridien hotel. The emirate’s Department of Health has also awarded the contract to build the Al-Jalila hospital, which is the first major construction contract to have been awarded by the government since 2009.

The tenders and awards means there are tempered hopes for Dubai 2012, although many contractors still have unpaid bills and outstanding disputes with clients in the emirate, there should be a number of major awards in 2012. These projects will serve the aviation and tourism sectors, which despite Dubai real-estate slump and debt woes continue to perform well.

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