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(Last updated: 10 June 2008)
Trends and opportunities
The market
The building and construction sector is the third largest sector of the United Arab Emirates (UAE) economy after oil and trade and it has experienced rapid growth in recent years.
The level of construction spending per capita is high – second only to Japan. The future prospects for the sector in the UAE also holds much promise.
In 2007, construction contributed approximately seven per cent to the overall GDP of the UAE. From 2008 to 2012, growth within the construction industry is anticipated to expand at an average rate of five per cent per annum. The three main areas for construction in the UAE are Abu Dhabi, Dubai and Sharjah, with Abu Dhabi currently the epicentre of construction activity.
Factors driving construction spending in the UAE include:
- Government spending on infrastructure such as roads, ports, airports and rail to support its commitment to becoming a business and tourism hub for the Gulf region.
- High rates of imported labour (both blue collar and professional) who further add to the demand for residential housing, commercial suites and solid infrastructure.
- The positive outlook of private-sector developers who are constructing a raft of high-rise commercial and mixed use buildings, shopping malls, hotels, tourist resorts and low-rise residential complexes to support the rapidly growing population.
- The high oil price which contributes significantly to the wealth of the UAE.
- The relaxation of foreign investment laws to allow non-UAE nationals to purchase property.
Opportunities
Services:
- Urban design and master-planning
- Architecture and design (including green design)
- Landscape design and services
- Interior design
- Spatial information services
- Consulting engineering
- Construction contracting
- Facility management
- Engineering construction
- Project management
Products:
- Construction equipment
- Lifts, elevators and building maintenance units
- Landscape supplies
- Kitchen fittings, sinks and tap-ware
- Flooring products
- Paints, coatings, adhesives and waterproofing products
- Windows and door products including insulated glass
- Hot water systems
- Lighting systems
- Building automation systems/smart house technology/electronic products and systems
- Building security products – alarms, security grills, locks, door handles, fencing
- Air-conditioners and associated products
- Fixing and fastening systems
- Soft furnishings including carpets/blinds/curtains/shutter systems
- Swimming pools and associated equipment and chemicals
- Safety products
- Environmentally friendly products
The UAE is Australia's second-largest market in the Gulf, with strong growth prospects:
- It has a sound economy, a fast-growing and youthful population, a well-established and managed banking system, excellent infrastructure, and a sophisticated business community familiar with Western practices.
- Australia's profile in the UAE is high. There is increasing recognition of Australian companies and capabilities. Over 100 building-related Australian companies have established themselves in the UAE. Many take advantage of the UAE’s world-class transport, financial and communications infrastructure and make their offices there a regional base.
- Australia's advanced engineering and building-services, innovative products, can-do approach and ability to deliver are ideal for the UAE's huge infrastructure programs.
The UAE Government is continuing to promote capital development projects in the areas such as power, desalination, manufacturing and industrial zones. These developments represent opportunities for Australian firms, as they are significant in value and number.
Projects usually call for tenders from local companies with international joint venture partners.
Private sector projects such as commercial buildings, malls, entertainment complexes and hotels also represent significant opportunities as they are in line with the drive to develop infrastructure in the tourism and leisure sector. This is highlighted by the government of Dubai promoting large ‘city-within-city’ projects. While in Abu Dhabi, there is large-scale development of a number of the natural islands.
Infrastructure development
Dubai is a Gulf trading hub and 73 per cent of imports are re-exported. Dubai’s ports are ranked the world’s third busiest after Singapore and Hong Kong. A new port is being built at Ras Al Khaimah and a second terminal at Jebel Ali is due for completion in 2008. In Abu Dhabi, feasibility studies are being completed for a proposed US$400 million port expected to commence operations in 2009.
Airport expansions are planned in order to cope with the expected doubling of tourist numbers to 15 million per annum by 2012. At Dubai International Airport (DIA), a third terminal and two additional concourses to accommodate a large order of Airbus 380s are under construction at a cost of US$4.5 billion. A whole new airport called Dubai World Central International Airport is being built at Jebel Ali. It will be 10 times the size of the existing DIA and Dubai Cargo Village combined, and have six runways. Activity, however, is not restricted to Dubai. The Abu Dhabi Airports Company is also undertaking significant projects, spending US$8 billion on the construction of a new control tower, a new terminal building for Etihad Airways and an additional 4km stretch of runway.
Until the rail system is complete in 2009, the UAE will continue to rely heavily on its road network. Some significant new road projects include plans to build parallel routes to Skeikh Zayed Road, starting with a widening of Emirates Road through the Al Quoz industrial area. The road between Dubai and Sharjah will be upgraded and widened. Forty-five new pedestrian crossings are being built in Dubai, particularly across Sheikh Zayed Road. In Abu Dhabi there is significant road construction, particularly around the Al Raha Gardens development.
Of further interest, in Abu Dhabi, the Industrial Zone is being extended by the Higher Corporation for the development of Special Economic Zones (HCSEZ). Plans are also under way for the construction of the largest, single-site aluminium smelter in the world in the heavy industry zone of Khalifa port and industrial area. Phase 1 is expected to be operational in 2010. A steel complex is being constructed in Mussafah city.
Hotel construction
It has been anticipated that 100 more hotels will commence operations in the UAE within the next three years. This means an additional 30,000 hotel rooms. In Dubai, resorts will be built on the three Palm Islands and The World project. In addition, many hotels are planned for the newly developed areas of Dubailand, Bawadi and in the Burj Dubai precinct. In Abu Dhabi, planning is well under way to develop Yas and Saadiyat Islands.
These will offer a range of facilities including extensive cultural and commercial precincts, residential and hotel accommodation. On Saadiyat Island, the Abu Dhabi National Hotels Group (ADNH) is planning to build a 400 room hotel, estimated to cost US$190 million. Completion of this project is scheduled for 2009. The same company is also building the 300 room Gulf Hotel.
Residential and commercial construction
A series of residential projects are underway to cope with the influx of expatriate workers. Residential towers are being built at Dubai Marina, around the Burj Dubai and as part of the Dubai International Financial Centre development. Significant residential, retail and health-related facilities to house 87,000 middle income workers is also underway at Dubai Industrial City at a cost of US$436 million.
Extensive commercial development is taking place at Business Bay and in the Bawadi area. In Abu Dhabi, a development to house 140,000 is underway in the Al Raha Beach and Gardens area. There will also be significant opportunities arising from the Saadiyat, Yas Island and Masdar development. Finally, new facilities are being planned for Abu Dhabi’s police which will include police stations, clinics, hospitals, staff accommodation and training facilities.
Dubai projects:
Abu Dhabi projects:
Competitive environment
There are around 6000 construction-related companies in the UAE of various sizes and specialisations. Initially, products and skills demanded in the market were not available locally, which meant that over 80 per cent of construction material and equipment was imported. In the '90s, around 85 per cent of major contracts were awarded to foreign companies (in partnership with local companies).
The major American and European services providers are well established in the market. In addition, the services and manufacturing industries are maturing and an increasing range of products are now manufactured in the UAE. The combination of these factors makes the UAE construction industry very competitive and price conscious.
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