Commercial infrastructure will gain pace in the UAE in the coming years as economic diversification from oil and gas continues to grow, according to recent report by BMI Research
Commercial infrastructure will be the clear outperformer within the broader construction sector of the UAE in the coming years, as economic diversilcation gathers pace and the various emirates focus on developing higher-value service industries.
According to a new report by BMI Research, twin factors will fuel the outperformance of the UAE'S commercial building sector in the coming years - in the short-term, Expo 2020 will drive commercial activity in Dubai, while over the long-term, efforts to diversify revenue streams away from oil and into higher value add service and tourism industries will stimulate investment into commercial building projects, particularly in Abu Dhabi.
Commercial infrastructure growth will continue to be centred upon Dubai in the short-term, largely due to ongoing construction activity associated with Expo 2020. Though we have longhighlighted Expo 2020 as a key catalyst of higher levels of construction activity, the proliferation of investment pledges relating to the Expo has accelerated over the past year as the deadline nears.
In November 2017, for example, Cimolai Rimond Middle East, a joint venture between Cimolai and Rimond, secured a deal to construct Al Wasl Plaza in Dubai. The project is the lnal major design element of the Expo 2020 site, which will focus around a planned 438ha site, the largest ever created for a World Expo. Located in Jebel Ali, construction at the site is expected to cost between $2bn to $4bn. The site will feature 180 purpose-built pavilions, an underground service rail network, and a photovoltaic solar power canopy capable of producing 50% of the site's power. Work is expected to be completed for 2019.
In the long-term, we expect that investment in Abu Dhabi's commercial building sector will help offset an expected decline following the conclusion of Expo 2020. Though we note that Dubai's share of commercial building value clearly outstrips that of Abu Dhabi at the present time, we anticipate that Abu Dhabi's share of the pipeline will grow in the coming years as the government prioritises efforts to expand the emirate's economic base beyond oil.
Illustrating Abu Dhabi's ambitions in the commercial infrastructure space, its government aims to attract 7.9mn tourists annually by 2030 under the auspices of its Abu Dhabi 2030 Plan, up from 4.4mn in 2016. Furthermore, the emirate hopes to expand its retail and oflce space to 400ha and 750ha by 2030, respectively, up from 250ha and 150ha in 2013.
As such, we are seeing a number of big-ticket commercial projects moving through the construction pipeline that will help sustain elevated growth rates. Given our oil and gas team's expectation that oil is unlikely to rebound to the higher prices of the last decade and a half, we expect similar projects and investment pledges to accelerate going forward.