Builders cheer Abu Dhabi's development plan

Published January 29th, 2012 - 04:11 GMT
Construction companies were already engaged on most of the projects; many had already been put out to bid
Construction companies were already engaged on most of the projects; many had already been put out to bid

Construction companies are reacting with cautious optimism at news the Abu Dhabi Government is ready to restart billions of dollars worth of projects.

Dozens of projects in the pipeline were under review for most of last year, leaving builders in limbo. Many shifted personnel and resources to Saudi Arabia and Qatar, where work was going forward. "The indication of pushing ahead is a positive message," said Chris Gordon, the group general manager of Habtoor Leighton Group. "There is quite a backlog of work that would have been awarded in the second half of 2011."

The Executive Council confirmed funding for a wide variety of projects, primarily focusing on infrastructure, health care and education. Big-ticket items included a 700,000 square metre terminal for the Abu Dhabi International Airport, and a budget and timetable for construction of the three primary museums on Saadiyat Island, including the Louvre, which is now scheduled to open in 2015.

Construction companies were already engaged on most of the projects; many had already been put out to bid. "There were no projects that we didn't know about," said David Barwell, the chief executive, Middle East, for Aecom. "I'm pleased to see now there is some financial commitment going toward them." But there were some notable omissions in the Executive Council's announcement, including any mention of the Capital District, a central element of the Abu Dhabi Plan 2030.

The Capital District is intended to cover 45 sq kilometres and serve as the centre for the federal government. "The announcement suggests a reduction in future releases of real estate supply," said David Dudley, the regional director of Jones Lang LaSalle, a property consultancy. "Several previously announced, government-backed real estate projects have been excluded from the list - emphasising the Government's ongoing rationalisation of real estate supply to establish more stable market conditions."

There were some surprises on the Executive Council's list. The council reaffirmed financing for planning a metro and rail system for the capital, a project that many observers thought had been put on a back-burner. And while schools have long been a priority for the Government, the announcement upped the ante.

The Council unveiled funding for 24 schools, plus six special needs rehabilitation centres; just 13 schools are currently in development, said Miceal Sammon, the chief executive of the Sammon Group, an Irish company specialising in school construction. "The pace [of construction] had slowed and now we see an increase in the pace," he said. "For international companies like us, it reaffirms and encourages us to keep the commitment to the UAE."

The Council also announced plans to fund the long-delayed Al Mafrag-Ghuwaifat road project, connecting Abu Dhabi to Saudi Arabia, which could cost Dh10 billion (US$2.72bn). The road was originally developed as a ground-breaking public-private partnership, but plans stalled last spring, in the final stages of the process.

Construction executives believe the road now will be funded in a more traditional manner. The Council's announcement left other questions unanswered. There is still no schedule for launching many of the projects and it is likely many will have to be re-tendered, after months of delays since bids were accepted.

The Louvre may be among the projects where contracts will need to rebid or renegotiated, construction executives say. A Tourism Development and Investment Company (TDIC) spokesman declined comment. "Over the coming months the announcements from the individual departments on their respective budgets and timetables will be key to the future success of the programme," said Nick Smith, the head of cost and commercial management for EC Harris, a construction consultancy.

The awarding of contracts and the timing of projects is likely to have long-term implications for construction companies, he said. "There is likely be a gap between the announcement and when these projects ultimately come to fruition. And this could create a challenge when it comes to retaining skilled resources, especially at a time when Abu Dhabi is likely to be competing with Qatar for this talent."

The Government might benefit from the delays in some projects. Material costs have come down and constructions companies are chasing fewer available jobs in the UAE. "It's going to be very competitive to win [the project contracts]," Mr Gordon said.

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