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The construction sector is Dubai is beginning to move again. The chance for architects to leave a mark on one of the most iconic skylines in the world is a possibility once more. © The Business Year © The Business Year Called 0-14 after the site number of the Business Bay district, the architects intentionally sought to create an alien presence © The Business Year

REVIEW

Jump Start

Building sites around the Emirate are picking up the pace, as stalled projects get a second life and new mega developments are put out for tender.

The outlook for the construction sector of Dubai and the UAE is beginning to look more positive after a rocky few years. In 2012, the UAE as a whole had the second largest projects market after Saudi Arabia, when $26 billion worth of contracts were awarded. Projects such as the Mohammed Bin Rashid (MBR) City and the Bollywood theme park, both of which are in Dubai, have lifted confidence in the country and the sector as a whole. Dubai has been able to repay or reschedule all its debts, restoring confidence in the local economy, and the construction sector especially. This has led market analysts to forecast that, by the end of 2013, the total value awarded projects in the UAE could reach $35 billion. By May 2013, $13.5 billion worth of contracts had been awarded. Economically, the UAE is in the strongest position it has been in since the 2008 global financial crisis, with GDP growth in 2013 set to pass the 4% mark, while the IMF predicts it will reach 4.4% by 2015. The construction sector is expected to capitalize on this and rise as a percentage of GDP from around 10.6% in 2013 to 11.1% in 2015.

In Dubai, there is more evidence that the construction boom is returning, according to official figures. In 2012, the municipality issued 23,243 building permits in total, which is a significant increase on 2010 figures of 14,822. The majority of these permits were for housing, including 12,952 for private villas and a further 1,366 for commercial villas. There were also 2,182 industrial permits, 3,339 permits for multi-story buildings, and 2,227 building permits for facilities and services issued in 2012, while over the year the municipality also issued 2,421 completion permits for ongoing projects. As of the end of 2012, there were 632 building consulting offices and 5,635 contracting companies in Dubai. 

 

MAJOR PROJECTS

After the global crisis, many megaprojects in Dubai were either abandoned or put on hold as cash flows dried up. Projects such as the World Islands were left undeveloped and largely untouched until recently. In 2012, the Royal Island Beach Club was built on the Lebanese Island and is now seen as the first commercially developed island for the project. There are even reports that work has restarted on Palm Jebel Ali to repair sea erosion, as well as to hook up vital infrastructure that will allow major construction to commence. A major confidence booster for the sector was the announcement of MBR City in November 2012. The first of four districts of MBR City is expected to transform 4 million sqm of land into an exclusive destination for leisure, retail, financial activities, and shopping. Joint-venture partners Meydan Group and Sobha Group announced that they would take part in the project to develop 2.4 million sqm of parkland, woodland, waterways, and large open spaces. One of the main attractions of this initial phase will be a 350,000-sqm water park, which will be the largest man-made blue lagoon in the world, with 7 kilometers of artificially constructed beaches alongside retail, leisure, and sports attractions. It will also feature 1,500 luxury villas completed over four phases, creating a very low-density residential environment. The joint venture is hoping that each villa will sell upward of AED9 million each, while the whole of District One is expected to cost around AED21 billion and should be completed around 2016. 

Shortly after the announcement of MBR City, Meraas Holding introduced a massive entertainment and leisure development centered on movies from Hollywood and Bollywood. The project will involve five entertainment parks, each with a different theme. The initial phase is said to cost around $2.7 billion and will be completed in 2014. It is hoped that is will become a top global tourist attraction, bringing in people from all over the world, especially from India. It will be a purely entertainment-based project, featuring new concepts in food and beverage services, and will be located in the Jebel Ali region of Dubai. Maraas also announced the Bluewaters Island project in February 2013. The $1.6 billion development is to be sited off the coast of Jumeriah Beach Residence, and will be a mixed-use project on a new artificial island. It will host the world’s largest Ferris wheel, which will become known as the Dubai Eye. At 210 meters high, the Dubai Eye will offer views along the coastline of Palm Jumeirah, Burj Al Arab, and the Burj Khalifa. The Dubai Eye will cost an estimated $272 million to design and construct.

Along with the megaprojects, the Emirate is also taking on a more modest task of increasing the housing supply. By 2015, the construction sector is predicted to add a further 38,000 new homes to the existing stock, with 18,600 expected to be ready by the end of 2013. Around 5,800 units of these will be in Dubailand, 4,000 in Dubai Sports City, and 3,600 in Business Bay, with the rest spread across the city. Overall, residential sales prices have increased by 16% year-on-year with apartment prices—17%—performing the best, while villa prices rose at an impressive 12%.

 

BUILDING MATERIALS

The Dubai Chamber believes that the UAE has the potential to become the leading supplier of cement for the MENA region and possibly beyond. One of the main reasons, for this is that over the past couple of years there has been a significant increase in investment in infrastructure and construction protects in the MENA region, as well as other key foreign markets. As the construction and infrastructure sectors begin to gain momentum again, so too will the cement industry. The UAE has a total installed capacity of 31 million metric tons per year split across 11 cement plants. One of the main producers of cement close to Dubai is Binani Cement, with an annual capacity of 11.25 million tons. Binani Cement is among India’s most reputed manufacturers and has supplied some of Dubai’s largest projects, with the Dubai Metro being one of the company’s most prestigious projects locally. Jebel Ali Cement is another local cement producer for Dubai with an annual capacity of just under 1 million tons. The company was established in 1978 and largely supplies cement to oil wells. Overall, the price of cement has dropped 2.6% between 2011 and 2012, while bricks showed the largest price increase in the same time period at 11.2%. Gravel and sand showed the greatest decrease in this timeframe, with a drop of 4.2%. Steel prices dropped quite drastically between 2011 and 2012, by 9.3%; however, Bharat Bhatia, the CEO and Founder of Conares, a leading steel company in the UAE, still expects the steel industry to grow by 25% over 2013. The installed capacity of the steel market in the UAE is expected to grow from 2.1 million tons in 2012 to 3.6 million tons by the end of 2013. Conares has full confidence in the UAE’s steel industry and has invested $150 million in its plants, which account for 15% of national demand. 

Confidence is once again coming back to Dubai’s construction industry, and investors and contractors are looking to see how they can be a part of the skyline of one of the most recognizable cities in the world. 

 

© The Business Year

YEAR IN REVIEW

INSIDE PERSPECTIVE

Dubai & the Future

YEAR IN REVIEW

Rated for Diversity

INDUSTRY & MINING

REVIEW : Industry

Commit to Contribute

FOCUS : Special Zones

Space for All

Q & A : Industrial Cities

Ready to Rumble

Q & A : Knowledge Centers

Two to Tango

FOCUS : Auto Sales & Spare Parts

In Sum of This

FORUM : Auto Sales

Back on the Road

Q & A : FMCGs

Meals on Wheels

HEALTH & EDUCATION

REVIEW : Health

A Gram in Time

INTERVIEW

HE Essa Al Haj Al Maidoor, Director-General, Dubai Health Authority

INTERVIEW

Marwan Abedin, CEO, Dubai Healthcare City (DHCC)

FORUM : Roche Diagnostics

Quality of Life

FORUM : Healthcare

Way to a Well

FORUM : Service Providers

Helping Hands

REVIEW : Education

Spoiled for Choice?

Q & A : Higher Education

Foreign Grounds

EXECUTIVE GUIDE

REVIEW : Conducting Business in the UAE

Getting Started

REVIEW : Practicing Business in Dubai

Legal Minds

REVIEW : Legal Business Structures

The Brass Tax

REVIEW : Taxation in the UAE

Fair Share

Q & A : Women in Leadership

Fresh Perceptions

ROUND TABLE : The Labor Market

Keeping the Talent