Market waits for Abu Dhabi's next generation of projects

15 February 2016

Spending will change once nuclear and airport schemes are completed

On the 14 February contractors submitted bids for the contract to build Abu Dhabi’s Reem Mall development.

Valued at about $1bn the tender attracted interest from the leading construction companies operating in the UAE. The interest in the mall is not surprising as the project is probably the largest scheme in Abu Dhabi for which construction will start this this year.

The dearth of major construction opportunities is not a new phenomenon in the UAE capital, which since 2011 has adopted a more conservative stance when it comes to development. Last year, the largest construction scheme to move forward was Gulf Related’s AED1.5bn Al-Maryah Central retail complex that was awarded to Canada’s Brookfield Multiplex.

Limited opportunities coupled with Etihad Rail’s decision to suspend the tendering process for contracts to build the second stage of the Etihad Rail project in late January make it easy to conclude that Abu Dhabi’s construction market is dead.

The reality is a little more complicated. While new awards have slowed, Abu Dhabi is working on two of the largest projects it has ever undertaken. The most noticeable is the expansion of Abu Dhabi International airport, for which construction on the Midfield Terminal Building is now well advanced.

The other larger project is further away from the city and progresses largely unnoticed. Over the past five years contractors have been busy working on Abu Dhabi’s nuclear power scheme at Barakah close to the Saudi border in the emirate’s Western Region.

These two projects are a massive financial commitment for Abu Dhabi, and in a low oil price environment it is perhaps not surprising that the government is reluctant make any major new capital expenditure commitments.

The dynamic will change next year as both the airport and nuclear projects are due to be completed. As the spending comes to an end the government will be free to allocate its budget for new projects.

There are signs that the government is planning for new projects. For example, the UK’s Arup is working on an update to the capital’s surface transport masterplan, which could mean that tendering finally starts for Abu Dhabi’s Metro and Light Rail projects.

Etihad Rail could also be retendered.

Another priority could be the further development of Yas Island, as consultants are selected to prepare designs for new projects such as arenas and hotels that will round out the island’s entertainment offering,

With several options available, all eyes will be on the government and how it chooses to spend its capital expenditure budget from 2017 onwards.

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