The UAE's construction industry will thrive in post-Expo 2020 period due to new initiatives launched by the government, higher oil prices and improving investor confidence in the economy, says a report.
Research and Market, the world's largest market research store based in Dublin, said in its latest report that an increase in crude oil production and government efforts to diversify the economy are expected to drive investment in the UAE construction industry in the next five years. The industry, which recovered last year following two years of contraction, is expected to rise at a compound annual growth rate of 4.64 per cent during 2019-23 as against 1.08 per cent in 2014-18 period. It is expected to hit $101.2 billion by 2023 from $80.7 billion in 2018 due to recovery in crude oil prices, a rise in non-oil product exports and a decrease in the fiscal deficit. It registered a growth of 4.2 per cent last year.
The report titled 'Construction in the UAE - Key trends and opportunities to 2023' said new investment is expected in residential, energy and utilities, infrastructure and commercial construction projects.
Referring to various government initiative such as the Ministry of Education Strategic Plan 2017-21, National Strategy for Higher Education 2030 and Education 2020 Strategy, the Energy Strategy 2050, the Sheikh Zayed Housing Programme and the Dubai Tourism Strategy, the report said construction industry has a promising outlook.
A spokesperson of Emaar Properties said the positive growth of the economy, led by the record performance of Dubai's aviation, hospitality, retail and financial services sectors, and the strong return on investment will continue to drive the real estate sector.
"The infrastructure spending in preparation for Expo 2020 Dubai also serves as a catalyst, boosting investor confidence," the spokesperson said.
Rizwan Sajan, founder chairman of Danube Group, said the construction sector will continue to do well in the UAE due to a number of factors.
First, he said oil price plays a role in the public investment. The current oil price hovering around $70 will help increase investment into the economy from the GCC countries.
Second, the new projects announced by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, last week, will keep the sector busy in addition to the on-going mega projects, such as Dubai South, Dubai Hills Estate, Shindagha Corridor, Union Railway, Deira Islands, etc.
"So, there won't be any shortage in construction activities," Sajan said.
Residential construction leads
Research and Market report noted that residential construction was the largest market in the UAE construction industry during 2014-18, accounting for 33.1 per cent of the industry's total value in 2018. The market is expected to retain its position in next five years due to government efforts to balance housing demand and supply through the construction of housing units.
Data by the BNC Projects Journal disclosed that over 15,000 projects worth $791 billion are at various stages across the UAE. It included an estimated $202.8 billion of projects in concept, design and tender stages, positioning the UAE with the second largest project pipeline after Saudi Arabia's $827.4 billion pipeline.
"With a positive shift in sentiment on the back of recovering oil prices, economic diversification, strong liquidity in Abu Dhabi and the long-term health of our real estate market, we are optimistic about the year ahead," said Maan Al Awlaqi, executive director - Commercial at Aldar Properties.
"Sentiment in the UAE's real estate sector is increasingly positive as the region prepares for Expo 2020 and we expect to see this have a positive impact on real estate projects in close proximity such as our own Alghadeer community," he added.
Investment in energy, utilities
The energy and utilities construction segment was the second-largest contributor to the UAE construction industry during 2014-18, accounting for 26.7 per cent of the industry's total value in 2018. It is expected to follow a similar trend in next five years as the government will be investing Dh600 billion to develop renewable energy projects in the country by 2050.
Al Awlaqi of Aldar Properties said initiatives such as Ghadan 21, Adnoc's petrochemical city, sustained FDI into Kizad, and twofour54's upcoming campus on Yas Island, which will bring 10,000 employees to the destination, are driving demand for mid-market schemes such as Water's Edge. "We are also optimistic about tourism, enjoying circa double-digit compounded annual growth which will be further propelled by the Dh500 million allocated to the sector as part of the aforementioned Ghadan 21 stimulus," he said.
Emaar Properties spokesperson echoed the similar views and said sector has a promising outlook. "Our outlook for the property sector is robust, underpinned by the exceptional performance of our real estate business in 2018," the spokesperson said.
Atif Rahman, director and partner of Danube Properties, said the construction sector will continue to thrive in the UAE due to a number of factors.
"The biggest reason is that government has remain committed and focused on infrastructure expansion, which has always boosted the sector in a big way leading to an almost unending momentum," he said.
He said the development pipeline of Dubai is a long one and the current mega projects has enough work for the next decade.
"Besides, the economic diversification drive and industrial development will further add to the construction projects. There would be many more surprises as we move forward from the government as the nation grows. Dubai will continue to remain a construction and development hub for years to come, as it continues to attract investment," he said.
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