Gulf developers have more reason than most of the region’s businesses to be thankful to see the back of 2009. With $470bn of real estate projects currently on hold in the GCC and financing difficult to find, the past 12 months have been extremely tough.
Yet the signs at the beginning of 2010 are more promising. As Dubai’s ruler, Sheikh Mohammed bin Rashid al-Maktoum, opened the world’s tallest tower – Burj Khalifa – on 5 January, the region’s construction companies were hoping its success would mark the onset of better times for the industry.
And indeed, across the GCC real estate -construction markets are showing signs of recovery, but at different speeds.
$299bn – Value of GCC contracts at bidding stage in 2010
3,500 – Number of residential units at Aldar’s Al-Falah scheme that will be ready by 2012
In cash-rich Abu Dhabi, the mood among construction companies is optimistic. The $1bn engineering, procurement and construction (EPC) contract for the Louvre Abu Dhabi on Saadiyat Island is earmarked for the third quarter of 2010, with a projected completion date of 2012.
The award of the contract will be a major event in the UAE construction sector this year, but one Dubai-based contractor is sceptical that a corner has been turned.
“I do not think 2010 will be a great deal -better than 2009,” he says. “Abu Dhabi will be more stable and there is not enough supply of real estate presently, so there is demand there. Qatar is also promising. But I think Dubai will remain the same.”
An Abu Dhabi-based developer says progress in the emirate will be more measured in 2010 than in the boom years of 2003-08.
“Abu Dhabi will be steady – not dead, but not like it was two years ago, which is probably a good thing,” says Steve Worrel, director of mixed-use developments for Yas Island, a $40bn tourism project being developed by the local Aldar Properties.
Mohammed al-Mubarak, chief commercial officer at Aldar Properties, acknowledges that Abu Dhabi’s more measured growth, compared with Dubai, was beneficial for the company and enabled it to continue to roll out real estate schemes during the downturn. “This year will be an important year for Aldar, with the completion of the first elements of major developments, such as the Al-Bandar residential district and office development at Al-Raha Beach, and the souk at Central -Market,” says Al-Mubarak.
Aldar is also on schedule to complete its Yas Yacht Club, Yas Links Golf Course and the Ferrari World Abu Dhabi theme park this year.
In Aldar’s Al-Falah real estate development on the outskirts of Abu Dhabi, 3,500 residential units and 140,000 square metres of commercial space will be completed in the next two years.
“This is going to be an important year, in which lots of activity comes to fruition”
Mohammed al-Mubarak, Aldar Properties
Contractors working on real estate projects in Saudi Arabia are also positive about the year ahead. Nasri el-Helou, managing director for Saudi Arabia at Riyadh-based Land Real Estate Investment & Development Company, says his firm is pushing ahead with its $2.7bn Ajmakan real estate project. This will include -commercial buildings, a palace, a five-star hotel, two office complexes, 1,500 villas and a -shopping mall.
“We have received approval from the municipality, so we can start ground works. We have mobilised on site, the designs are ready and we can begin to advertise,” says El-Helou. “Saudi Arabia needs residential units, so there will be lots of bookings. People were conservative with their spending last year. But now the market is getting stronger and we anticipate there will be lots of interest.”
Tenders for the construction of Ajmakan are expected to be invited in the second half of 2010, with an award by the end of the year. El-Helou also tells MEED the company is seeking to build another multi-billion-dollar development in 2011, again in Riyadh.
“It will be residential, but it will have a mixed-use element to it,” he says. “It will be bigger than Ajmakan.”
To the south of the capital, another major real estate project is progressing, the SR36bn ($9.6bn), 1.6-square-kilometre (sq km) King Abdullah Financial District (KAFD). The project will include a 400-metre-tall headquarters building for the Capital Markets Authority (CMA), which will supersede the 309 metre Kingdom Tower in Riyadh as the country’s tallest building. Bids have been received and an award is due by March.
The CMA tower is one of several high-rise developments planned for the KAFD. The Saudi Stock Exchange (Tadawul) and other Saudi financial institutions, such as Samba, are all looking to develop high-rise buildings.
“Last year was not bad at all,” says Waleed Aleisa, project manager at Al-Rayadah Investments. “But 2010 will probably be better. CMA is to sign very soon, as is Samba. The demand is there, Saudi Arabia is prospering.”
On the Red Sea coast, Jeddah is enjoying a construction boom. In October 2008, a -consortium of developers formed the City -Centre Development Company (CCDC) to launch the SR37.7bn ($8bn) Jeddah Central Development Project.
The 6 sq km mixed-use project in Jeddah’s historic centre will expand its role as a regional commercial hub and regenerate the city centre. An engineering, procurement and construction contract award for the first phase of the project is expected by September this year.
Meanwhile in Qatar progress continues on the country’s key project, Qatari Diar’s $5bn Lusail development. Work is due to begin in June, with Qatar Petroleum planning to start construction work on a new headquarters building, known as the Qatar Petroleum -Complex. The site will include a main office tower and a series of interconnected mid-rise office buildings to be used by approximately 3,000 staff. There will also be a medical centre, corporate training facilities, data centres, multi-storey car parks and associated -infrastructure. Overall the scheme covers 35 sq km and includes residential, commercial and retail areas. It will provide accommodation for 200,000 people, along with schools, hospitals and entertainment facilities.
Work is also progressing on Oman’s main real estate project, The Wave Muscat, a mixed-use development including a residential district consisting of 4,000 apartments, town houses and villas, four hotels, a 300-berth marina, 120 shops and a golf course. Contractors have been invited to prequalify for contracts to build two hotels, the 253-bed Fairmont Hotel and 300-bed Kempinski Hotel, together with support buildings capable of accommodating 1,200 staff. Tenders are expected to be issued by the end of March.
In Kuwait, the $2bn Al-Ahmadi Township project is at the bidding stage, although the project is understood to be delayed, because the client is awaiting approval from the government for a new law covering build-own-transfer contracts.
Kuwait Oil Company is the developer of the township, which is located about 40km south of Kuwait City. The scheme involves the -building of 3,500 residential units, a conference centre, schools, a golf course and affiliated infrastructure works.
In Bahrain, the $3.2bn Diar al-Muharraq project, being developed by Kuwait Finance House, is at the bidding stage. The construction contract is due to be awarded by June.
With a total of $299bn worth of construction contracts at the bidding stage in the Gulf, 2010 does indeed look more promising for contractors in almost every market but Dubai.
While a return to the heady days of the construction boom is unlikely, this year will provide a much stronger stream of contract awards than last year for both local and international contractors.