Preparing for post-Covid-19 construction

28 July 2020
MEED's GCC Construction Outlook 2020 report with coronavirus update assesses the prospects for construction in the coming years

With about $1tn of construction and transport projects planned or under construction, there is no shortage of potential opportunities in the GCC’s construction market.

And with a further $1.2tn of developments promised through long-term transformational masterplans and mega- projects, such as Saudi Arabia’s $500bn Neom future city, the potential of the GCC construction market is not likely to disappear anytime soon.

But while there are abundant opportunities for construction companies in the GCC, there is no shortage of challenges. 

Over the past five years, contractors, consultants and manufacturers have faced considerable pain and uncertainty as a result of the fall in oil prices in 2014.

Cuts to government spending and a growing oversupply in key real estate markets such as Dubai reduced new project opportunities and increased competition for work, while delayed payments hit cash flow.

Low point

With about $57.8bn-worth of construction and transport project contracts awarded in the GCC in 2019, real estate and infrastructure together accounted for about 70.8 per cent of all project spending in the region.

Despite this, 2019 was the worst year for the construction industry in the GCC since 2012 in terms of project contract awards. 

Awards were 9.5 per cent down on award levels in 2018, and far below the $107.5bn of contract awards seen in 2013, the best year on record.

By the end of 2019 however, construction companies were looking forward optimistically to a long-awaited rebound in construction activity, led by the giant Saudi Arabian market. The stabilisation of oil prices and the launch of the kingdom’s megaprojects promised to herald a new dawn for GCC construction. 

By March, the optimism was dashed as it became clear that the Covid-19 pandemic was not going to pass quickly, and companies shifted their focus to simply surviving the crisis.

While the Covid-19 lockdowns have disrupted supply chains and on-site delivery, a new slump in oil prices in March and April has raised new doubts about future project opportunities. 

The problems of the past five years have accelerated in the first five months of 2020, and construction companies must rethink their processes and strategies in order to prepare for the new GCC construction market in a post-Covid-19 world.

Building projects that are two-thirds complete still need a lot of finishing work and that provides a lot of opportunity for cost savings
International contractor

According to regional projects tracker MEED Projects, there are $503bn-worth of construction and transport projects at the execution phase across the region. The average progress of these projects is 67 per cent, which suggests that the majority of projects have passed the point of no return for their investors and will be completed. 

The three countries in the GCC region below the 67 per cent regional average are Oman at 59 per cent, Bahrain at 60 per cent, and the UAE at 66 per cent.

Although the region’s construction projects are considered resilient, they will be subject to cost pressures. “Building projects that are two-thirds complete still have a lot of finishing work to be completed and that provides a lot of opportunity for cost savings,” says an international contractor working across the region.

REPORT: GCC Construction Outlook 2020 with coronavirus update

> Gain immediate insight into the GCC construction market
> Identify new business development opportunities
> Discover the current and planned client activities across the region
> Identify top contractors, clients and competitors
> Assess specific challenges and drivers behind each sub-sector

Market intelligence

Key to rethinking business development strategy is understanding where the future growth will come from, and who the key clients will be going forward.

GCC Construction Outlook 2020 is the latest premium intelligence report from MEED Insight. It assesses the prospects for construction in the coming two years in the wake of Covid-19, and analyses the opportunities and challenges for contractors, consultants and suppliers across the region’s six markets.

It is a powerful resource for anyone seeking to do business in the GCC construction and infrastructure sector at a key point in the development of the market.

MEED’s GCC Construction Outlook 2020 report with coronavirus update is available here

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