Nine multibillion property schemes have left the rankings this year
Saudi Arabia’s $93bn King Abdullah Economic City remains the GCC’s largest project in 2011, even as the regional slump forces 15 projects off the MEED Projects Top 100 rankings.
Only two projects, Saudi Arabia’s $11.5bn Princess Nora bint Abdulrahman University for Women and Abu Dhabi’s $4.9bn Borouge 2 petrochemicals plant expansion, have been completed. The rest have been shelved.
|Top five GCC projects|
|King Abdullah Economic City||Saudi Arabia||93|
|Sudair Industrial City||Saudi Arabia||40|
|Yas Island Development||UAE||37|
|Source: MEED Projects|
Nine real-estate projects across all GCC markets except Oman have exited the Top 100 this year after they were shelved by their developers. The largest was Kuwait’s $77bn Madinat al-Hareer or City of Silk, which last year was the GCC’s second largest project. In January, Kuwait Municipality appointed Canadian firm Malone Given Parsons to prepare a masterplan that will replace the proposed City of Silk and Bubiyan island developments.
The other others were Abu Dhabi’s $15bn redevelopment of the Mina Zayed port; Dubai’s $13.5bn The World archipelago of offshore islands; Saudi Arabia’s $13.3bn Qasr Khuzam; $9.3bn Al-Shamiyah Mecca Development; the $8bn Prince Abdulaziz bin Mosaed Economic City; Qatar’s $10bn Urjuan mixed-use development; Bahrain’s $6.6bn Water Garden City; and Kuwait’s $6bn Bubiyan Island.
For the real-estate projects that remain active, the pace of development has slowed. Real-estate projects have moved forward slowly since property prices first began to fall in late 2008. Since then, investors have been reluctant to buy off plan properties starving developers of one of their key sources of funding for upcoming projects. The problem is made worse by banks not wishing to lend to developers or investors as they seek to reduce their exposure to the real-estate sector in the aftermath of the global financial crisis.
|Five schemes to leave Top 100|
|Madinat al-Hareer (City of Silk)||Kuwait||77|
|Mina Zayed port redevelopment||UAE||15|
|Qasr Khuzam||Saudi Arabia||13|
|Urjuan mixed-use development||Qatar||10|
|Source: MEED Projects|
In 2011, the slowdown has been felt most acutely in Abu Dhabi, which still has five major projects in the top 10. Development has not really started on the $40bn Capital District, and work on the $37bn Yas Island, $37bn Reem Island, $27bn Saadiyat Island, and $22bn Masdar City has slowed considerably over the past two years, with contractors complaining contracts not being awarded and delayed payments on existing schemes across the UAE capital.
According to regional projects tracker MEED Projects, some $6.6bn of construction contracts have been awarded in Abu Dhabi during the first three quarters of this year, about 30 per cent less than the $9.5bn of awards made during the same period of 2010.
With spending on real-estate spending drying up, construction companies have been busy looking for new projects in other sectors. “Since 2008, we have had to diversify,” says an Abu Dhabi-based contractor. “We always wanted to diversify our operations, but the easy option was to work on real-estate projects. We have no choice now. We have to look at other sectors and markets.”
Since 2008, the GCC projects market has been increasingly supported by government-sponsored infrastructure schemes. This year, nine new infrastructure projects together with four new energy and petrochemicals schemes have been launched. The largest new project to join the Top 100 is the $20bn Yanbu Integrated Refinery & Petrochemicals Complex that is being developed by Saudi Aramco, Japan’s Mitsui & Company and Nabaa Industrial Development & Investment Company.
Other major schemes to join the Top 100 are Kuwait National Petroleum Company’s $18.5bn Clean Fuels project, the Roads & Transport Authority’s $12bn Dubai roads masterplan, and a $10bn highway planned by Abu Dhabi and Riyadh that will connect the two cities.
The Top 100 next year is expected to reflect the changing market dynamics even more. Analysts do not expect a significant recovery in the real-estate market and with global financial system still facing debt problems more private sector schemes will struggle to move forward.
With oil prices still above $100 a barrel, the GCC governments will be able to step into the void left by the private sectors, although it is unlikely that this will fully replace the volume of work that was planned by real-estate developers before 2008.
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