The civil war raging in Syria is having a major impact on neighbouring Lebanon’s construction market. The $444m-worth of construction and infrastructure deals awarded in Beirut in the first three quarters of 2012 is down almost 50 per cent on the $854m awarded during the same period in 2011 and 74 per cent on the $1.7bn awarded in the first three quarters in 2010.

As with all areas of Lebanon’s economy, the construction sector is at the mercy of the region’s political climate. It will not begin to recover until the situation in Damascus is resolved.

Urban regeneration

The real estate sector has traditionally dominated Lebanon’s construction market. Multiple civil wars and invasions over the past 35 years have resulted in local and international developers undertaking several major real estate and urban regeneration schemes to repair the damage.

This trend has continued into 2012, with all five of the highest value construction contracts awarded in 2012 for real estate projects in Beirut. The largest contract award is the estimated $120m deal for the Beirut Terraces real estate scheme, secured by the local Man Enterprises in the third quarter of this year. The 27-storey residential tower will include 130 apartments, an outdoor swimming pool, and retail facilities.

The other four contracts making up the top five are also tower projects and vary in value from $35m-69m. One of the deals involves the estimated $67m Damac Tower, which will have 28 storeys and will be located in the Marina area of Beirut.

While the majority of construction projects in Lebanon are funded by private investors and developers, the Council for Development and Reconstruction (CDR) is an important client in the country’s construction sector. The CDR was set up by a decree in 1977 to repair the damage wrought by Lebanon’s civil wars.

The CDR is working with the UN and the Washington headquartered World Bank to develop a number of key projects to repair the country’s damaged infrastructure.

One of the largest projects the council is currently overseeing is the estimated $200m Greater Beirut Water Supply Project, which is planned to improve water provision for more than 2 million people in southern Beirut. CDR invited contractors to prequalify for the tender earlier this year.

The CDR is also moving ahead with plans for the estimated $100m Jbeil Caza water and wastewater project, located in northern Lebanon. The CDR has received a loan from the Italian government to complete the scheme. Contractors have been invited to submit bids for the tender in December. Experts have warned that unless Lebanon upgrades its water network, the state could suffer from chronic shortages as soon as 2020.

While Beirut’s construction sector has huge long-term potential, short-term issues relating to internal security and the ongoing conflict in Syria are likely to stifle its potential in the immediate term.