The third quarter of 2022 may prove to be the turning point for Dubai as two major projects that stalled during the pandemic were reinvigorated, indicating that the initial seeds of a long-awaited recovery for the emirate's construction sector have now been sown.
Major construction contract awards have been in short supply in recent years, with a lacklustre property market creating only limited project opportunities and government clients focused on completing projects for the Expo rather than tendering new schemes.
The Covid-19 pandemic further compounded the lack of significant new work. Uncertainty forced developers to put new projects on hold, and, in some cases, even ongoing projects stalled.
As a result, no major contract awards have been signed in Dubai for almost two years. According to regional projects tracker MEED Projects, the last construction or transport contract valued at over $250m was awarded in 2020 for work on the Jewel of the Creek project in Deira.
“While there have been new projects starting in Dubai over the past few years, the focus has been on property,” says a regional engineering consultant. "The asset class performing the best is villas, so we as a firm have been engaged on these projects.
“Are these projects as big as the schemes we worked on in the past? No,” he says.
The major contract drought may end in 2023 as construction starts for new lines to extend the Dubai Metro network and for three resorts on a man-made island off the coast of the emirate in the Umm Suqeim area.
The largest of the two projects moving towards execution is the planned extension to the Dubai Metro network. After being put on hold in 2020, consultants restarted design work on the project at the start of this year. The Roads & Transport Authority (RTA) is now expected to issue tender documents in the second quarter of 2023.
The project, referred to as the blue line, involves delivering new metro lines that will extend the existing red and green lines. It requires constructing over 20 kilometres of new lines, of which about half is underground.
The second project is The Island. Local developer Wasl reissued tender documents in September for the main construction works, which involve building MGM, Bellagio and Aria hotels. There will be 1,400 hotel rooms and apartments, in addition to retail, food and beverage, and entertainment options.
First launched in March 2017, The Island project received added intrigue this year following the launch in Ras al-Khaimah of a resort planned by the local Rak Hospitality Holding and US-based casino and hotel operator Wynn Resorts.
The project’s January launch coincided with Ras al-Khaimah Tourism Development Authority’s (Raktda) announcement about establishing a division to centralise regulations for integrated resorts, which has led many to conclude that a federal law allowing some gambling in the UAE will be introduced soon.
When major projects were tendered 15-20 years ago, the question was: Are there any new players on the bid list? Today the question is the opposite: Is anyone left to bid?
As major projects restart, the question has turned to who will build them. With diminishing order books over the past five years, contractors have reassessed their position in the market.
A series of international firms have either exited the market, scaled down their operations as they wind down their existing projects, or, in extreme cases, gone out of business.
“When major projects were tendered 15-20 years ago, the question was: Are there any new players on the bid list?” says a local contractor that has worked on major projects in Dubai. “Back then, there was a stream of international companies coming to Dubai to work on major projects.
“Today the question is the opposite: Is anyone left to bid for the project?”
The bid lists forming for these new projects suggest that while there are still contractors present in the market, they remain cautious about bidding for new projects.
Much of the caution is down to companies being mindful of the problem projects in the recent past. Over the past five years, some of Dubai’s most high-profile projects have been blighted by disputes saddling contractors with significant financial losses.
Caution is a common theme during economic recoveries. Contractors in Dubai exhibited similar restraint in 2012 and 2013 when Dubai first began to emerge from the global financial crisis.
Experience shows that while caution may rule in the initial phases of recovery, once a contractor’s competitors start winning work, attitudes to risk soften, and the desire to keep up with their peers becomes ever more important.
Dubai is still some way from reaching that stage. But as the end of 2022 nears, the emirate’s construction sector may finally be able to look forward to significant new projects starting for the first time in years.
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