Lusail City falls behind

12 July 2011

Progress on the multi-billion dollar Lusail real-estate development is slow. But with Qatar named host nation for the 2022 World Cup, the project is expected to gain renewed impetus

Key fact

The Lusail development is expected to accommodate up to 200,000 residents

Source: MEED

While the first residents of Qatar’s Pearl real-estate development have been living in their new homes for a couple of years, progress on the nearby Lusail City project has been much slower. But the project is expected to accelerate now as Qatar gears up to host the 2022 World Cup.

We have certainly seen a positive impact on real-estate demand since the World Cup announcement

David Dudley, Jones Lang LaSalle

Designed at the onset of the Gulf’s construction boom in 2004, the first contract was awarded to China’s Sinohydro in 2006 for the initial marine, earthworks and site preparation on the $20bn-plus Lusail real-estate development. However, since then there has been little progress. “The scheme is moving forward, but very slowly,’’ says a Doha-based contractor interested in the development.

Slow progress on Qatar developments

Lusail is located 15 kilometres north of downtown Doha and covers a total area of 35 square kilometres. The project is planned to be executed in phases over the next 10 years, and is expected to accommodate up to 200,000 residents. The development will contain residential clusters, commercial districts, shopping and leisure facilities and two golf courses.

Lusail City construction projects
TransportTotal valueStatusClient
Al-Khor HighwaynaDesignPublic Works Authority (Ashghal)
Lusail Expressway – Phase one$350mEPC bidAshghal
Lusail Expressway – Phase two$350mDesignAshghal
Lusail light-railway transit (LRT) network$1.8bnPMC awardedQatar Railways Development Company (QRDC)
Lusail LRT rolling stock contract$1.8bnEPC bidQRDC
Real estate   
Al-Sidra Golf Residential Development$3.5bnDesignArcapita, Barwa Real Estate Company
Lusail mixed-used development$800mOn HoldDiyar al-Kuwait Real Estate Company
Lusail Entertainment City, Downtown Precinct$1.5bnOn holdAbu Dhabi Investment House, Majid al-Futtaim Group
Lusail Iconic Stadium$662mDesignQatar Olympic Committee
na=Not available; EPC=Engineering, procurement and construction; PMC=Project management consultancy. Source: MEED Projects

Lusail Real Estate Development Company, a subsidiary of state-owned Qatari Diar, is the master developer for the project. In April 2010, German contractor Hochtief formed a joint venture with the company to develop the project. The agreement follows a similar deal signed with France’s Vinci Grand Projets in 2006.

Sources in Qatar attribute the lack of progress to a combination of the effects of the global recession on the region’s property market and government spending being prioritised elsewhere.

“As with other markets in the region at present, the market is currently in a quiet period of the property cycle,’’ says David Dudley, director of operations at property consultancy Jones Lang LaSalle Middle East and North Africa. “Demand remains suppressed compared to previous years and completed projects get absorbed.”

Qatar’s recent success in winning the right to host the football World Cup in 2022 is expected to give a welcome boost to the Lusail scheme and other large-scale real estate projects in the country.

“We have certainly seen a positive impact on real-estate demand since the World Cup announcement,’’ says Dudley. “The World Cup [requires] new real-estate and infrastructure development to directly facilitate the event. It also means the government is investing in other economic development initiatives to ensure sustainable levels of real-estate demand before and after the event.”

Large sections of the Lusail scheme have been sold to different investors to build a variety of real-estate projects.

Diyar al-Kuwait is one international developer, which is set to build a mixed-use scheme on Lusail. In March 2010, Diyar al-Kuwait appointed the local office Kuwait’s KEO International Consultants to design and manage the construction work on the $800m development. It will be located on the southeastern corner of Lusail, known as the Marina District.

The part of the project that KEO will be working on includes 160,000 square metres of commercial space, 130,000 sq m of office space and 30,000 sq m for retail. A residential area covers a further 87,000 sq m and comprises 640 apartments, as well as 27 four-bedroom townhouses. Two basement car parks will provide 4,070 spaces for residents and visitors.

Construction work was due to start in December 2010, but with the slump in Doha’s property market, there has so far been no progress with the project.

“Lusail is like the majority of construction projects announced in Qatar in recent years. It takes such a long time to prequalify and tender projects that they all fall behind schedule,’’ says an international contractor based in Qatar.

Financial issues have stalled progress on other parts of the Lusail development. In September 2010, it was announced that Barwa Real Estate Company, a subsidiary of Qatari Diar, was taking over one of the golf course developments from Kuwait’s Al-Imtiaz Investment due to financial reasons.

Moving ahead with Qatar construction projects

There has been more tangible progress with other schemes planned for Lusail.

In April, UAE-based developer Damac Properties awarded the local Draieh Contracting three contracts worth a total of $164m for construction work on three mixed-use developments. Draieh will be working on the Business Square, Piazza 1 and Piazza 2 developments. Construction work on the scheme has begun and the project is moving forward as planned.

The initial enabling works on the Business Square and the first phase of the Piazza projects have been completed. Draieh has also begun the main construction work on the Piazza project.

Despite a slow start, the master developer is now pressing ahead with tendering the infrastructure and transport schemes for the development. These include the Lusail Expressway and the light-rail transit (LRT) system. The Lusail development is a key part of Qatar’s World Cup plans and will accommodate the Lusail Iconic stadium, the largest planned sports arena with a capacity of more than 80,000 people. All the necessary infrastructure work needs to be carried out within the scheduled timeline so that contractors have access to build the facilities required for the tournament.

Lusail Expressway in Qatar making headway

The Public Works Authority (Ashghal) has issued tender documents for the first package on the estimated $700m Lusail Expressway project have been issued, with a submission date of the start of August. The project has suffered with delays in the design and tendering stage; it was originally due to be tendered in August 2010. Qatar’s success in bidding for the World Cup appears to have given the project renewed impetus.

The first phase of the road project will run from the Arch roundabout to the area surrounding the Ritz Carlton hotel in Doha.

The first package will be 5.8km in length and will have about 16 lanes, some of which will be two or three levels. The expressway will also include three major interchanges, slip roads, underpasses and bicycle lanes. Construction work will take 36 months to complete.

The second package, which has not yet been tendered, will run beside the Lusail mixed-use development and then onto the Pearl real-estate development. The expressway will be about 12km long when completed.

In addition to the expressway, the Lusail development is planned to have a LRT, which will cover 22km and include 34 stations. In April, the US’ Parsons International and Aecom signed a five-year contract with Qatar Railways Development Company (QRDC) to provide project management and consultancy services for the LRT network.

QRDC also recently invited companies to submit bids for the rolling stock contract for the LRT. The deal will involve supplying 34 trains. Ashghal is expected to tender the Al-Khor highway on the Lusail development before the end of 2011. The highway project, also known as construction package 9 (CP9), will be a multilevel road that will run along the western border of the Lusail City development and will contain up to five interchanges.

“Designs will be finalised in August and then the project will be put out for tender,’’ says a source close to the project.

The Lusail development is not the only large-scale real-estate development currently under development in Qatar. Work is ongoing on the Pearl development, a man-made offshore island, which covers a total area of 4 million sq m and is planned to house nearly 30,000 residents when completed.

Future prospects for Qatar construction schemes

The current weak demand for property and slow progress on developments like Lusail, has led many to doubt whether such schemes will be completed. But industry analysts still see opportunities in Qatar’s real-estate market.

“Medium-term prospects remain extremely positive. The weight of sovereign and private wealth, underpinned by government investing revenue surpluses in economic development, infrastructure and other nation building initiatives has a major positive impact on real-estate markets,’’ says Dudley.

Those in Qatar’s real-estate and construction sectors are anxious over allegations of corruption surrounding Qatar’s World Cup bid. Football’s governing body Fifa has refused to rule out a re-vote if allegations of bribery are proven. However, Fifa president Sepp Blatter has since said that he will not personally initiate any investigation. And in the latest twist, the original source of allegations has retracted her claims in early July.

“It would be a major blow if the World Cup was taken away. The planned investment in infrastructure and property is important for projects to go ahead as planned,’’ says a consultant based in Doha.

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