Work on Expo-related infrastructure projects

As Expo 2020 is around the corner, the outlook for the UAE construction industry is buoyant

The UAE currently has 11,334 projects valued at $272.7 billion under construction in the UAE as of November end 2018, according to data from BNC Network, a construction intelligence platform.

Dubai has 4,792 projects under construction valued at $123.9 billion, Abu Dhabi has 1,653 projects under construction valued at $114 billion while all the other emirates (Sharjah, Fujairah, Ras Al Khaimah, Ajman and Umm Al Quwain) have 4,888 projects under construction valued at $34.8 billion, BNC Network informed.

Contractors’ order books are in good shape, with big Exporelated infrastructure projects, Al Maktoum Airport expansion and Etihad Rail phase two contracts up for grabs. The total value of all major Expo-related construction activities in Dubai totals up to an estimated Dh156 billion.

Expo-related projects have kept UAE contractors busy, with this having a knock-on effect on the overall economy.

“Even though there has been a decline in contract awards in 2018, the UAE has fared significantly better than its GCC neighbours and has held up the industry in these challenging times. The vision and economic fundamentals in the UAE are strong and with the resurgence of oil and gas spending by the Abu Dhabi National Oil Company [Adnoc], we are optimistic about 2019,” Avin Gidwani, CEO of BNC Network, told Khaleej Times.

Construction contracts worth $38.3 billion were awarded in the UAE in 2018 (until November end). This only includes main, EPC and infrastructure contract awards. This compares to construction contract awards worth $44.6 billion in 2017.

Although tenders for most Expo 2020 national pavilions have already been issued, contractors are hopeful of getting more in 2019. Most of the big contracts for Expo-related infrastructure projects have also been already awarded. The contracts for many of the individual pavilions have also been awarded but there remains some opportunities for interiors.

“There remains a large amount of projects due to complete in 2019 and 2020. Most of the tenders for these jobs have already been let but there will inevitably be more interior and other tenders,” said Craig Plumb, head of research, Mena at JLL.

According to BNC Network, there are 15,090 active projects worth $795.4 billion in the UAE as of November end 2018. Active projects are those in concept, design, tender, under construction and on hold.

“The government will continue spending on infrastructure and overall construction as Expo 2020 is around the corner,” said Cyrus Engineer, Managing Director at SP International Property Developers.

As market conditions have become more competitive, payment terms have been extended and some contractors are experiencing an increase in outstanding collections. “These trends are having a negative impact on the cash flows and profitability of both developers and contractors,” added Plumb.

The construction industry in the UAE has its own set of operational challenges. “Delayed payments followed by lack of skilled labour are the biggest hurdles contractors face globally, and it’s also very prevalent in this region. However, while the change may not be overnight, we do expect the operational challenges to improve, as more global companies see the value of doing business in the Middle East, especially as there are a number of landmark targets to be achieved,” observed Engineer.