Government-led social infrastructure projects will drive growth in the construction sector over the next decade
Government-led initiatives will drive growth in the GCC construction sector over the next decade as regional governments continue to focus on social infrastructure projects, experts say.
There will be an estimated Dh3.3 trillion of construction developments underway across the GCC between now and 2020 according to a statement by UAE-based building material company Danube released this week.
The statement cites a report by Kuwait Financial Centre (Markaz).
Real estate projects account for an estimated Dh1.89 trillion of the current developments across the GCC, Danube stated.
Andrew Jeffrey, Director, Infrastructure & Capital Investments at Deloitte Middle East, said demand for housing, road, and rail projects would drive the construction sector.
“There are significant projects like the nuclear programme in Abu Dhabi and the RTA in Dubai is expanding, which is helping provide access to some developments in residential areas,” Jeffrey said.
Jeffrey said that Dubai would follow through with fundamental initiatives as the emirate positioned itself as the premier employ and financial hub in the Middle East.
Jeffrey said public sectors in Abu Dhabi and Dubai would invest in health and education as the two emirates cement themselves as major players.
Dubai-based Craig Plumb, Head of Research MENA, at Jones Lang Lasalle said the construction industry had been picking up since several pre-financial crisis projects had restarted.
Plumb said a lot of activity shifted to Saudi Arabia and Qatar following the financial crisis but had returned to the UAE. Plumb added that the UAE had become cautious of oversupply in the market and said that projects would be phased out over longer periods.
Mohammad Bin Rashid City, Bluewater Island by Merass holding, major retail extensions at Ibn Battuta and Dragon Mart, the Louvre, and Yas Mall in Abu Dhabi, were listed by Plumb as signs of sustainable for the construction sector.
Jeffrey said developments by the Abu Dhabi and Dubai government were only beginning and would be fuelled by a more sustainable approach when compared to pre-financial crisis outlook.
The UAE has benefited from the Arab Spring, Jeffrey added, which has highlighted the UAE as a good place for investment.
Jeffrey said social infrastructure initiatives in Qatar led by Qatari Public Works Authority ‘Ashgal’ would add to industry growth.
Ashgal, who are responsible for the construction and management of major projects in Qatar, have projects in the pipeline valued in excess of 100 billion Qatari according to their website.
Jeffrey added the construction sector in Saudi Arabia would maintain growth due to demand for housing, education and healthcare in the kingdom.
Asked whether significant growth was dependent on headlining grabbing events Dubai Expo 2020 and Doha World Cup 2022, both Jeffrey and Plumb said they would not be a catalyst.
“It’s the legacy of the event that’s important,” Plumb said, add that these events were bringing forward developments such as Dubai World Central Airport and the Metro expansion.
On the notion of foreign intervention in Syria, Jeffrey and Plumb agreed there would be no impact.
The UAE would still build a nuclear programme and capital project infrastructure would not be impacted but the perception of independent investors could be hampered by conflict in the Gulf, Jeffrey said.
Coline Schep, Associate Analyst at Control Risks in Dubai, an independent specialist risk consultancy, said there was no indication so far that projects would be stalled if there was intervention in Syria.
Schep said at present speculation of intervention was the biggest risk as it impacted investor confidence.
“If conflict was to break out involving the US then certain companies would become more cautious,” she said.