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Recovery building up in the ME construction industry

DUBAI - After a dismal slump in the backdrop of the global economic turmoil, the building and construction sector in the Middle East has begun to swing back to vibrancy with scores of mega projects across a wide spectrum of sectors, including nuclear, real estate and infrastructure finally getting on track, according to a series of recent surveys.

According to a new research by Zawya, an online business platform, the oil and gas sector leads the construction recovery by accounting for 30 per cent of the projects under way in the region. While the real estate sector shows strong recovery trends with projects accounting for 19 per cent of the total projects underway, power and water and infrastructure sectors are also showing vibrancy with the launch of several projects.

Another report estimated that 1,600 projects worth over $560 billion are active in the UAE alone.

The Ventures-dmg GCC Building Construction Industry Report 2010, developed for The Big 5, reveals that in 2010 an estimated $72 billion in construction contracts in the GCC will have been rewarded, with $23.5 billion of that in the UAE. In actual construction spending in the corresponding period in the GCC, the estimated figure is $54 billion with the UAE at $23.5 billion.

Deloitte Middle East, in a report, estimates that Saudi Arabia, which currently has a 38 per cent share of the total construction projects in the region, is expected to award contracts worth $86 billion in 2011. Currently, the kingdom has $624 billion worth of projects planned or underway, said the professional services firm in its “GCC Powers of Construction 2010.”

Saudi, Abu Dhabi and Qatar continue to be the GCC markets harbouring greatest potential for the construction industry, the Deloitte report stated.

“The UAE has 36 per cent of total construction projects, worth $958 billion, and is expected to see its construction industry grow by a compound annual growth rate of 9.6 per cent from 2010 to 2014,” it added.

Qatar, with a smaller 15 per cent of total construction projects, is estimated to see its construction industry grow by a CAGR of 12 per cent over the same period, the Deloitte report said.

According to Zawya Projects, in terms of specific project interests, the most widely viewed developments include the $40 billion ENEC nuclear power plant in the UAE, the expansion of Muscat’s airport in Oman, and the $2.3 billion Sidra medical and research facility in Qatar, which is reflective of the most popular industry sectors mentioned above.

“Geographically, Saudi Arabia continues to draw significant interest as it intends to spend $385 billion in development in a five year plan starting 2010. Libya is also generating a lot of traffic with its plans to spend $500 billion across all sectors including real estate by 2020,” the Zawya report said.

“The general view is that real estate in the Middle East is dead in the water. While oil and gas, real estate, infrastructure and power and water-related projects together form the order of popularity on Zawya Projects, it is worth nothing that the difference in popularity between real estate and infrastructure is less than one percent,” said Areej Sharif, Head of Construction Community at Zawya.

“Transparency and the lack of up-to-date information are two of the most significant challenges facing the Middle East’s construction sector, and Zawya Projects enables decision-makers in the region and abroad to navigate the region’s current initiatives and developments with confidence,” the Zawya report said.

issacjohn@khaleejtimes.com