Construction Industry Update – Q1 2015
The construction industry is set to experience unparalleled activity over the coming decade with over 117 major programmes planned for completion by 2030, costing an excess of US$1 trillion. This is likely to bring in a demand of 1.2 million additional labourers to deliver these programmes through to 2019.
There is expected be an average annual construction growth over the next 5 years of 6.1% with the main driver of this growth being government plans to diversify investments away from the hydrocarbons sector.
Over previous years there has been an attempt to construct ports and airports to utilize its trade benefits for exportation of goods. However, key construction and infrastructure projects heading into 2015 and beyond are expected to be in the rail sector as regions attempt to boost internal logistic capacity.
With an increase of affordable housing and social infrastructure spending by government late in 2014 it will remain a key area of investment although it is not anticipated to provide long-term high-margin returns.
Events such as Expo 2020 and the FIFA World Cup 2022 are also major events that will bring demand for work and labourers up over the coming decade.
Without doubt one of the most exciting factors for the construction industry in the UAE and Middle East in Q1 2015 is the beginning of construction to the behemoth Mall of the World.
Dubai holdings released in a statement in 2014 that consultants are being finalized and construction is expected to begin sometime within January-March.
Expected to take 3 years to complete, this 48-million square feet, climate-controlled development will be the first of its kind and is set to bring in an estimated 180 million visitors annually, Dubai Holding said.
With this exciting project on the horizon, the overall outlook looks positive, with construction projects to reach an estimated Dh1.1 trillion ($315 billion) in the UAE this year, according to UK-based EC Harris.
Continued growth is forecasted right through for the next decade with the Dubai 2020 Expo being a main driving force behind this. It is likely and additional 277,000 jobs will be created in the run up to this event.
Spending from the government as they look to diversify away from oil revenues will see the construction industry busy heading into 2015 with increase spending on infrastructure within the health, education, housing, transportation, energy and alternative energy sectors.
Real growth is predicted to rise to 10.5% year-on-year with an average growth of 8.7% over the forecast period of 2015. The transport sector is expected to grow by 7.7% with rail leading the way in this market and a bounce back of the residential and non-residential market from 2014 is expected heading into 2015 with real growth forecasted at 9.9%.
The recent implementation of saudization has meant there has been a crackdown on illegal labour. This has slowed some projects and made the hiring process for some companies much longer.
Saudi Oger vice-chairman Ouday Al Shaikh mentioned in this article that “We always face the challenge of hiring skilled and qualified staff for our mega projects, especially in boom times, however good planning and open communication channels between the contractors and the clients tend to close these gaps and reduce the impact on the projects’ progress,” He also mentioned there was a strong demand for middle management within the region.
With a strong pipeline of construction projects and key events such as the 2022 FIFA World Cup, Qatar’s construction industry has performed extremely strongly through 2014 and will continue that trend going into 2015.
An upgrade to the short and long term forecasts is merely representation of this strength and the large scale projects that have not hit any major road bumps as of yet such as the Doha metro and developments to Doha’s new port will continue these growth rates.
It remains the fastest growing market in the GCC thanks to this large pipeline of projects, government spending and consumer demand. With fears surrounding the capacity constraints of the country, Qatar have dealt with them relatively well, but we will gain a greater understanding of these pressures in the medium term.
Qatar’s spending is expected to reach about $150 Billion USD over the next decade. With major investments in roads (USD20bn), railways (USD40bn), stadiums (USD 4bn), and deep water seaports, this is all aligned with Qatar’s 2030 vision development plan. This is likely to guarantee the construction market remains robust for at least the next decade.
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