GlobalData: Airport development is key to the future of Dubai construction

In late August, the ruler of Dubai, Sheikh Mohammed bin Rashid al-Maktoum, called for greater regulation of real estate developments in Dubai in order to ensure that real estate supply and demand remains balanced.

The announcement follows a sharp slowdown in Dubai's property sector and mounting concern about growing oversupply of real estate in Dubai, particularly in residential and shopping mall developments.

Investment in Dubai's real estate sector has surged since 2012 as the emirate recovered from near financial collapse triggered by the global financial crisis.

Further impetus came in 2013, when Dubai secured the rights to host the 2020 World Expo, which has turbo- charged property and infrastructure investment in the emirate.

The real estate surge has kept construction companies busy while the rest of the region has struggled with the impact of political instability and the collapse in oil prices in 2014.

Following Sheikh Mohammed’s statement, a new real estate planning committee was established tasked with balancing supply and demand.

The committee includes representatives from Dubai’s leading developers and it is expected that the new body will focus on curbing the launch of new projects. The move leaves Dubai’s construction sector wondering where its future work will come from.

The problem for contractors is exasperated by the construction work for Expo 2020 finishing next year. There are around $6.5bn of ongoing construction works at the Expo site that will be completed by the middle of next year ahead of the event starting on 20 October 2020.

Colin Foreman, Deputy Editor at GlobalData, says: "Construction is a major component of Dubai’s economy. However, statistics on its contribution tend to downplay its importance. This is because other sectors are indirectly reliant on construction activity. For example, many of the products manufactured in the emirate are used exclusively by the construction sector. Furthermore, for service sectors, many professions, such as legal, are heavily dependent on work that the construction sector creates."

Foreman continues: "The hope is that the emirate’s leadership will continue to invest in infrastructure projects to support economic growth. The big question is, what schemes will go ahead?”

The largest upcoming project in Dubai is the $33bn expansion of Al-Maktoum International Airport. The emirate's new airport is now the bellwether project for Dubai’s construction sector over the coming years.

Work is progressing in the projects, although last year Dubai confirmed that it had moved the target opening date for the first phase from 2025 to 2030. A $2.7bn substructure package is currently being tendered for the expansion of Al-Maktoum International airport.

It is the biggest construction contract to be tendered in Dubai this year and is of pivotal importance for the future of emirate's construction sector. Foreman concludes: "If the contract is awarded it will not only create work for the winning contractor, it will catalyze the further development of Dubai South, and the area surrounding the Dubai Expo site. Conversely, if tender is cancelled or delayed then it will further undermine the already fragile confidence in Dubai’s construction sector."

 

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