UAE's construction market to return to near full capacity, EC Harris reports

The report by the global built asset consultancy takes into account the UAE's estimated real gross domestic product (GDP) growth, thriving industry sectors such as leisure and tourism, ability to raise debt funding, investment in major pipeline construction projects and construction tender price levels.

EC Harris's tender price index shows that UAE construction tender prices fell by 3% during 2011, remained at the same level through 2012 and are unlikely to rise by more than 2% during 2013.

Abu Dhabi and Dubai are dominating this growth and confidence, setting the pace for the UAE construction market as a whole. Abu Dhabi has made a huge investment in energy and infrastructure as part of its 2030 Vision, and Dubai has become a prime location as a hub for trade and tourism. Demand in real estate and infrastructure is being fuelled by expansion and urbanisation in both emirates through a relatively young and growing population.

Chris Seymour, Head of Property for UAE at EC Harris, said, "After the highs and lows of recent years the UAE construction market is now more stable, although the key construction markets of Abu Dhabi and Dubai are at differing stages of the cycle. High-quality, well-designed and well-located developments remain in demand and the focus is increasingly on revenue generating developments. Although this may sound like an obvious condition, it has not always been the case."

Looking forward, report finds that one of the key challenges facing the UAE is the availability of resources that construction projects rely on. With both Qatar and Saudi Arabia investing heavily in infrastructure, the UAE will have to compete with these markets for commodities.

Chris continued, "With the recovery of the markets taking place in the UAE, developers are recognising that there is a window of opportunity to maximise the benefit of the downturn in construction costs. However, the usual caveats apply to purely selecting on cheapest price and the truth of "buy now pay later" will become apparent as claims and insolvencies gather pace from the supply chain. Companies that take a more sustainable approach to people and resource management will ultimately succeed as the recovery takes shape."