With oil prices averaging about $75 a barrel in the first three months of 2010, GCC governments have the money to keep the region’s construction industry busy with lots of new projects. The challenge is delivering quality as well as quantity
Gulf construction is still struggling with the shock of 2009, a bad year for the industry in most GCC markets. According to MEED Projects, cancellations and postponements slashed the region’s construction pipeline by 15 per cent in the year to the middle of March. And throughout the region, project professionals are searching for new contracts to replace the work that will soon be completed.
And yet, optimism is in the air across the Gulf this spring. Oil, which averaged about $60 a barrel in 2009, is now trading above $75 a barrel. Content that it has avoided an oil price meltdown yet still unsure about the state of the market in 2010, OPEC last week made no changes to production quotas. The consensus among observers, however, is that the oil price is likely to keep on rising.
The oil price remains the best indicator of likely future trends in the Gulf projects market. With oil above $70 a barrel, all the countries of the region will be solvent and liquid. Governments that deferred capital investment decisions in 2008 due to soaring material prices and, last year, because of the economic downturn are preparing to prime the projects pump once more. A new construction boom is coming.
It is a good time to take stock of what has been achieved since the GCC economy went into overdrive from the summer of 2003. At least $250 billion worth of major projects have been completed since then. Some city skylines have been transformed. In the summer of 2003, you could see on a clear day the outlines of Jebel Ali’s gantry cranes from MEED’s offices in Dubai Media City. Today, the view is entirely blocked by more than 100 towers that weren’t there then.
The roll of honour of fine projects that have been built in the past seven years is large and growing. It includes iconic buildings such as the Burj Khalifa and Terminal 3 in Dubai and the Emirates Palace Hotel in Abu Dhabi. In little more than two years, work has been completed on some of the word’s largest industrial projects. They include the massive Petro Rabigh complex in Saudi Arabia, expansions of LNG trains in Qatar, Abu Dhabi’s first direct reaction iron factory and no less than three GCC aluminium smelters.
The quality of these projects is world class. But too many Gulf buildings still aren’t. There is particular concern about office and residential buildings thrown up to meet soaring demand in most Gulf cities. Badly-designed, poorly-constructed and expensive to run, bad buildings are a blot on the region’s landscape. And they are bad business. Two years ago, a banker seeking quality, complete Gulf commercial buildings said that he managed to identify only one in the whole of Dubai he would consider investing in.
There is a growing need for a GCC-wide quality in construction initiative to show government and business that good buildings are not only possible they are essential for the future of the GCC economy.
But what does quality in construction require? Here are some suggestions. First, new projects need to be developed for the long term. The GCC has made huge progress in ensuring manufacturing is carefully planned. All GCC states have new, purpose-built industrial zones – examples include Abu Dhabi’s ICAD and the new Sohar Industrial Port zone — that are well-located and professionally-managed. But residential and commercial developments in Gulf conurbations often seem haphazard.
The GCC needs sound, long-term master plans for their booming cities. A shining example of what can be done is the Urban Planning Council of Abu Dhabi, the supreme planning authority for the emirate. Abu Dhabi’s new, compulsory building code is another sign that parts of the Gulf are getting serious about quality.
Despite the growing number of superb buildings being erected in the GCC, standards of design in general are deficient. Too many private developers buy architectural services off the shelf. The result is that the centres of some Gulf cities are dominated by crowds of discordant towers.
The GCC needs to take design more seriously. That is why the establishment of the Royal Institute of British Architecture (RIBA) Gulf chapter is so welcome. Its priorities include encouraging higher standards and increasing the number of Gulf-based architects.
Much of the burden for delivering quality falls on the shoulders of the construction industry itself. The challenge here is resisting pressure for cost-cutting that can have negative long-term consequences. Managers of leading construction firms say that intense price competition means that they have two choices: insisting on quality and losing contracts or cutting corners to make their bids competitive.
The building industry complains that building codes and other standards are inconsistently applied. Some believe the regulations are wrong and out of date. That requires appropriate government action. But the industry itself could, and should, do more to promote quality in construction and to highlight the long-term benefits of getting the job done right, first time.
MEED thinks quality in construction matters. We shall be focusing on this issue with increasing energy as activity in the Gulf projects market begins to build in the years to come. And we welcome examples provided by MEED readers of what is good and what is not so good in GCC construction.