Abu Dhabi: Bright spot

While construction in the UAE and the wider region has been hit by the financial crisis, Abu Dhabi’s commitment to forge ahead with its major developments bodes well for contractors active in the local market.

“The market might be slightly low, but the outlook is not,” Jawaharlal Gangaramani, president of the Al Fara'a Integrated Construction Group, told local press. “The governments are rolling out lots of projects, especially in Abu Dhabi, where large-scale projects are going to drive the demand up for some time.”

Approximately 1300 projects worth more than $418bn are currently under construction across the UAE. Another 303 projects worth $143bn are in the design, planning or bidding stages.

Indeed, the UAE is still the principle GCC construction market by size, with $714.8bn worth of projects on its books, according to the Dubai Chamber of Commerce & Industry. Over the past two years Abu Dhabi has been a key contributor to that overall figure.

Policymakers in the emirate have given the economy a shot in the arm by rolling out large-scale infrastructure projects, which have supported the construction industry, as well as the wider economy. The Department of Transport, for example, is expected to spend $68bn between 2010 and 2015 on the capital’s Surface Transport Master Plan (STMP), developing a comprehensive and international-standard public transport system.

With the population of Abu Dhabi expected to grow by 2m inhabitants by 2030, the STMP aims to decrease residents’ reliance on cars to stem traffic congestion. The project includes the construction of an underground metro, a tram, a ferry service and an extensive network of buses.

In addition to these local services, further plans are under way to create emirate-wide, countrywide and GCC-wide rail links for both freight and passengers.

Transport is just one area in which stimulus measures are evident. This strategy has been in the works for some time, with Sultan Al Mansouri, the minister of economy, announcing in late 2009 that Abu Dhabi would spend a total of $1trn on infrastructure projects over the medium term to stimulate the economy. “This will lead to extraordinary demand for building materials and technological innovations, thus boosting the economy further,” Al Mansouri said.

As the minister did not reveal a precise timeframe, the figure is tricky to quantify, although it is indicative of the government’s willingness to support contractors via a counter-cyclical spending programme. As further evidence, a number of large projects worth billions of dollars have already commenced.

One project that perhaps best represents this idea is Saadiyat Island, which will be home to a number of museums, resorts and the campus of New York University-Abu Dhabi. Although designed before the crisis – with an initial estimated price tag of $27.5bn – the project is beginning to take shape in some areas, while offering contractors the opportunity of new business in others.

Construction on Park Hyatt and St Regis properties is already in progress in the Saadiyat Beach District, with opening dates planned for 2011. The area will eventually be home to nine five-star hotels, including a Shangri-La and Mandarin Oriental, leaving plenty of room for further tendering of contracts. All projects on the island are due to be completed by 2020.

It is not just large-scale developments that have been providing eager contractors with work. According to a survey by Statistics Centre-Abu Dhabi (SCAD), there are 10,149 buildings currently under construction across the emirate. Some 5455 of these – or 53.7% of the total – are in the Abu Dhabi City, while 3828 (37.7%) are in Al Ain and 866 in Al Gharbia (also know as the Western Region).

While these projects have indeed helped to support the sector, a weak global economy and slump in construction internationally have resulted in more builders turning their attention to Abu Dhabi, which has stoked competition for local projects.

Even in this crowded market, contractors can nevertheless look to the future with optimism thanks to a rising population, economic growth – albeit more measured than in pre-crisis days – and increasing interest from foreign investors. By the same token, they can also take solace from Abu Dhabi’s strong economic fundamentals, which ensure the continuation of the majority of ongoing projects as well as a host of state-backed developments.

 

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