No rise in construction costs for Dubai property developers

30 March 2014

Competition among contractors is keeping prices low

Major property developers in Dubai have not yet experienced an increase in construction costs.

As the market becomes increasingly busy building new infrastructure and real estate projects ahead of the Expo in 2020 many in the industry expect costs to rebound after a sharp decline in 2009.

Although rising costs are still expected, so far prices have remained competitive for developers such as Nakheel and Majid Al-Futtaim that have been busy tendering construction contracts in 2014.

“There are still plenty of contractors looking for jobs, so I am not worried [about rising costs],” said Ali Rashid Lootah, chairman, Nakheel on 26 March. “Judging from the response we have to our tenders we get usually around eight to 10 [bids], that is a good number, so I think there is still plenty of supply with contractors.”

Nakheel’s biggest tender so far in 2014 has been for the contract to build its Nakheel Mall on the Palm Jumeirah. Six companies submitted bids. The low bidder is the local Actco General Contracting with a price of AED1.185bn ($323m).

Developers do expect prices to rise as major projects such as Nakheel Mall and the expansion of Mall of the Emirates move into the construction phase.

“There is a perception in the market that costs will go up,” said George Kostas, CEO, Majid al-Futtaim Properties on 3 March. “We have not seen that yet, but as the market improves we will see some cost pressure.”

For contractors competition and low pricing will continue to be a risk. “For us, the biggest risk is oversupply,” said Shaun Carter, group director, international and development, Carillion, on 18 March.

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