Thinner pickings

02 April 1999
SPECIAL REPORT CONSTRUCTION

THE Middle East is now into a second year of low oil prices which are rinsing through into reduced spending and less building activity in the worst affected countries. Developers are reviewing their options and hesitating before launching new projects. Government spending on public works and infrastructure is being concentrated on the most essential work. That said, there is an abundance of projects already under construction and expansion continues at a heady pace in selected markets. Egypt and Dubai remain particularly buoyant, in stark contrast to markets like Kuwait where activity has almost ground to a halt.

'We are going into a deep recession. New projects are on hold and budgets are tight for ongoing projects, to say nothing about payments,' says a consultant in Saudi Arabia. 'There has certainly been a downturn in private sector work...requests for new proposals have declined drastically.' Work is continuing on several large-scale developments in Riyadh, giving the impression of a buoyant market, but the volume of new projects being launched is down sharply. 'There seems to be a lot of activity but it's a backlog of stuff that started last year and the year before,' he says.

The most striking activity in Riyadh is in the Olaya area where revised building codes allowing taller buildings are transforming the area into an upmarket business district. The striking Co-operative Towers building, designed by Riyadh-based Omrania & Associates and built by Saudi Constructioneers, opened last year and has become an instant landmark, offering 74,000 square metres of office space over 20 storeys. Almost next door, Saudi Binladin is advancing with work on the even larger Faisaliyah Centre.

A few city blocks away, work has begun on the tower structure for the Kingdom Centre, the $300 million mixed-use complex being developed by the Kingdom Holding Company. The fourth package on the scheme - the main construction works - was let late last year to El-Seif Engineering Contracting, which has brought in Impregilo and Magil as subcontractors. The main construction work is due for completion by the end of next year.

Saudi Arabia has seen a flurry of awards in the power sector in the first quarter. The $835 million contract for the Shuaiba power plant was formally signed with ABB Asea Brown Boveri in February, and the local Meedco has taken more than $150 million worth of work for substations and transmission lines.

A slowdown in the pace of construction in Dubai - so often predicted - has yet to materialise despite fears of overbuilding and excess capacity in hotel, retail and office space. At Jumeirah, the spectacular beach hotel has opened for business and the offshore tower section of the development should be fitted out and ready for occupation later this year. More hotel projects are on their way, including a five star Grand Hyatt and a new Sheraton with 550 rooms. This year will also see the start of the revamp of the Al-Ghurair centre which is likely to be let in 40 packages worth AED 1,000 million ($272 million). Earthworks have already begun on the ambitious Westside Marina scheme, being developed by the local joint stock company Emaar Properties (see pages 16-17).

Abu Dhabi may see a slowdown in activity this year as the Khalifa Committee has signalled that it will be spending much less. This could spell the demise of the many small-scale contractors which cannot compete for the technically sophisticated, prestige projects that are now demanded (see pages 17-18). In Qatar, the huge City Centre scheme in Doha is set to rival, in size at least, the malls that have sprung up in Dubai since the early 1990s (see page 19).

Outside the GCC, Egypt continues to experience something of a building bonanza, particularly in the five star hotel sector. Consolidated Contractors International Company has a $264 million contract for the Golden Pyramids hotel project, and an award for the Nile Plaza Cairo Four Seasons hotel is imminent. The 600-room Conrad has just opened and the Meridien expansion should be completed next year. Joannou & Paraskevaides (Overseas) is building a Four Seasons resort in Sharm el-Sheikh and high quality residential and commercial projects in the Cairo area are proliferating (see page 8).

As summer approaches the clouds cast by lower oil revenues in some markets may start to lift if the recent oil price rally can be sustained. Nevertheless, as the following project reports attest, many regional construction markets are still generating new business, even in the face of the some of the toughest economic conditions since the mid-1980s.

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