The Abu Dhabi projects market: A product of uncertainty

20 June 2011

Volatile projects market leaves Abu Dhabi government indecisive over approving future developments. The fall in value of the emirate’s contract awards is feared to be the start of a long-term trend

If you had to choose one word to sum up Abu Dhabi in 2011 it would be uncertainty. 

The oil-rich emirate has not been directly affected by the protests and violence that have swept the region this year, but it still sits in a region where governments have been toppled and civil war has erupted.

Close to home, uprisings have been quashed in Bahrain, protests have been held in Yemen and Iran’s stance against the West continues to be a source of anguish for the Arab side of the Gulf.

In Abu Dhabi itself, the economy is growing increasingly nervous. The private sector is reluctant to invest and the multibillion-dollar real-estate projects the emirate was planning have stalled due to a 50 per cent fall in property prices since their 2008 peak. 

To keep its Vision 2030 urban masterplan on track, Abu Dhabi has been ploughing ahead with infrastructure schemes, propping up the UAE’s construction industry, which is still struggling to overcome the impact of the billions of dollars of work scrapped in Dubai in 2008-09.

With such an uncertain future, Abu Dhabi appears to have lost faith in the development plans it prepared during the boom years. While contracts are still being tendered, awards are not being approved. This is now being felt by contractors looking for work in Abu Dhabi. During the second quarter of 2011, the value of contract awards in the emirate has fallen by 81 per cent, to $843m from $4.5bn the previous quarter.

The fear is this could be a long-term trend as protests continue across the region, and property prices are expected to fall even further.

This pessimistic outlook has already led Abu Dhabi to review its population projections. Although not confirmed, figure are understood to have been revised significantly downwards. If fewer people are expected to be living in the emirate, there will be less demand for infrastructure. For construction firms, that means less new work. If that is the case, contractors will have to learn to be patient.

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