This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 8/7/2019

Overview

 

Starting in 2017, builders experienced continued financial pressure, with payments from both public and private sector clients slowing, fewer contracts up for award and margins compressed.  However, the major UAE real estate developers can better withstand the constrained financial climate than contractors, as the developers can dictate tough terms to the contractors-forcing the contractors to bear the brunt of the downturn.  According to an Abu Dhabi Executive Council circular from  March 2019, the Abu Dhabi government asked to amend contracts to “oblige contractors and suppliers to pay subcontractors within 30 days of receipt of government payments” to encourage the private sector to pay its financial due. 

In addition to a prolonged period of financial constraint, the UAE’s construction firms faced a new challenge last year; the introduction of VAT.  Contractors active in the UAE found that they were liable for VAT given that some of the current projects in their schedules would not have been completed until after 2018.  Therefore, they have to pass on the higher costs to clients in advance of the implementation of projects in the pipeline, which will encounter resistance, particularly in the current financial climate. 

Major developers are now seeking out new debt facilities in order to help fund new building projects.  This should ensure injections of much-needed liquidity into the construction sector, a cause for optimism. 
According to Business Monitor International (BMI), Dubai will be a regional high performer as it prepares for the Dubai World Expo 2020.  The scope of the Expo will include investments in tourism-related projects, commercial infrastructure, and transportation development (aviation and metro links).  These projects, along with the country’s economic diversification goals in the areas of healthcare, education, and transportation – will drive growth and provide major opportunities for U.S. companies. 

According to published data by BNC Projects Journal, over 15,000 projects worth an estimated $791 billion are at various stages of completion across the UAE.  This includes an estimated $202.8 billion of projects in concept, design and tender stages, positioning the UAE as the second largest project pipeline after Saudi Arabia's $827.4 billion. 
According to the construction intelligence site Protenders, urban buildings make up 57 percent of the total development while oil and gas projects make up 24 percent and infrastructure represent 19 percent for ongoing projects. For the upcoming $306 billion of projects, urban projects make up 42 percent, infrastructure 38 percent, oil and gas 20 percent. 

Dubai's current mega projects include the Dubai Metro Red Line extension (part of the Expo 2020 initiative), , the Royal Atlantis Resort and Residences located in Palm Jumeirah, the Dubai Harbor Creek project – a waterfront development spanning more than 20 million square feet, Burj Jumeirah,  the Museum of the Future, and the World Islands. In addition, to Sahel Al Emarat, Jubail Island, Noor Abu Dhabi the world’s largest single-site solar project in Abu Dhabi. 


Leading Sub-Sectors

Residential
The residential construction market is dominated by the UAE’s two major cities, Dubai and Abu Dhabi.  In Dubai, 69 percent of expatriates working in Dubai don’t have university degrees and most likely have low-paying jobs, obliging more than 33 percent of them to rent in cheaper emirates and commute to Dubai. 
Meanwhile, the middle and higher-end of the Dubai residential market has oversupply, reaching 43,000 residential units with136 Dubai projects between 85 and 99 percent complete, and an expected completion by the end of 2019, according to new data from Property Finder.  Abu Dhabi will have over 11,000 units expected to be delivered throughout 2019.  Real estate market in Abu Dhabi is encouraging due to the $13.6 billion government stimulus package and the introduction of new visa rules to encourage expats to stay longer in the UAE. 

Office Market
The amount of total office space in Dubai now stands at 8.56 million m² and in Abu Dhabi 3.7 million m².  In 2019, approximately 500,000 m² will be added in Dubai and another 300,000 m² in Abu Dhabi.  Average vacancy rates in the Central Business District (CBD) increased to 12 percent. Average grade a rents declined by almost nine percent y-o-y, to $420 per sqm. With ample choices available for tenants, landlords continue to offer attractive terms and the market is expected to tilt further in favor of tenants over the next 12 months. 

Retail Market
The UAE ranks fifth among the top-ten retail destinations in the world, and the country has seen its retail market grow Compound Annual Growth Rate (CAGR) of 3.8 percent to $73 billion from 2012 to 2016. In Dubai, tourist spending is among the highest internationally, with overnight visitor spending reaching $29.7 billion in 2017 alone.  In 2018, new retail space is expected to increase by 717,000 m2 in Dubai and by 467,000 m2 in Abu Dhabi. Major upcoming projects include Mall of UAQ in Umm Al Quwain, a mall project in Sharjah and in Silicon Oasis, Deira Mall, and Al Khail Avenue. 

Hotel Market 
Dubai continue to increase its hotel room inventory in the lead up to the Expo 2020.  Dubai had a total of 132,000 guestrooms by the end of 2019, and will have around 164,000 rooms operating when Expo 2020 opens.  Abu Dhabi will expect around 2,000 additional rooms by 2020.   Hospitality in Abu Dhabi has also witnessed significant growth. From January to December 2018, over 307 million tourists including more than 140,000 Americans stayed in Abu Dhabi. 
Healthcare Market 

The UAE continues to roll out major healthcare projects; however, the government is exercising caution to ensure the hospitals and healthcare facilities are built in geographical areas to prevent under-utilization and over-utilization of such facilities.  Dubai alone has 32,013 facilities, of which around 4,000 are internationally accredited. In 2019, nine new hospitals are planned in Dubai.  In Abu Dhabi, the 719-bed Al Ain New Hospital is currently under construction and the 739-bed Sheikh Shakhbout Medical City has been completed.  Based on the Dubai Health Strategy 2013 to 2025, Dubai plans to build three major hospitals: Mohammed bin Rashid Hospital located on Sheikh Mohammed bin Zayed Road, Al Maktoum Hospital in the area of Al Maktoum Airport in Jebel Ali, and Al Khawaneej Hospital.

Leisure Market 
The UAE is evolving into a major leisure hub.  Nearly 20 theme parks have either opened or are in the pipeline.  One of the biggest such parks is DreamWorks Zone which opened in 2016.  Dubai Parks and Resorts opened in 2017.  Additional announced projects such as the expansion of Motiongate and Bollywood Parks and Six Flags with a planned opening in 2019.  Mohammed Bin Rashid Library, and the 40-million-square-foot complex known as Meydan One – the world's longest indoor ski slope is also planned.  In Abu Dhabi, Yas Waterworld has been in operation for over two years while the Warner Bros. $1 billion theme park opened in July 2018.  In addition to welcoming another park as SeaWorld Abu Dhabi, a next generation marine life theme park with a research, rescue, rehab and release center which is scheduled to open its doors in 2022. 
Infrastructure Sector 

Today, the UAE’s infrastructure already boasts an impressive international ranking: first worldwide for roads, second for ports, and third for airports.  A large number of infrastructure works have started in recent years in the UAE Major roadway, airport, and port (upgrade) project upgrades continue in preparation of further expected population influx and of the upcoming Expo 2020 in Dubai. Dubai’s Al Maktoum International Airport opened for cargo operations in 2010 and it opened its doors to passengers in 2013. When the $36 billion expansion is completed, the airport will be the largest in the world, able to accommodate more than 160 million passengers and 12 million tons of cargo per year. 

In addition, recent reports have announced that the Dubai Government has earmarked 16 percent of its $15.5 billion budget for 2019 for infrastructure, around $2.5 billion, reflecting the emirate's concern for the gradual implementation of the Expo 2020 projects, including the storm water tunnel for the Airport City, the Expo 2020 Venue areas, and services in the field of health and environment.  It has also allocated $2.8 billion for the 2020 Dubai Metro’s Route in Abu Dhabi, including the $3 billion Midfield Terminal.


Opportunities

Despite tough competition from local property developers, many opportunities exist for U.S. firms to collaborate, consult, and contract for construction projects.  Foreign companies should be prepared to either register locally or pre-qualify with developers and government agencies in order to respond to tenders.  A number of U.S. companies have already won projects: Parsons for infrastructure, HOK for venue design, WATG for the masterplan of Burj 2020 and the surrounding district, and AS+GG for the design of Burj 2020. 

The Government of Dubai is making significant investments in construction in preparation for Expo 2020.  The third and final infrastructure package for the Expo 2020 support areas, including car parking construction, are open to local and international businesses.  Expo 2020 Dubai awarded $30 billion worth of contracts in 2018 as preparations for the first World Expo in the Middle East, Africa and South Asia continue to gather momentum.  For information on the procurement process, visit the Expo 2020 eSourcing portal. 

In addition, the UAE government will continue to encourage increased green construction activity, including the new institutional segment (government office buildings, hospitals and schools). 
Finally, local UAE contractors have expressed demand for international sourcing in the following specialized areas:

The construction market, a key driver of the UAE’s economy, is second only to Saudi Arabia in size within the GCC, when planned and un-awarded projects are included. In addition, the UAE is the region’s largest projects’ market with the value of work awarded reaching $44.5 billion in 2018.  Despite the prevailing climate, the construction industry remains resilient and the outlook for the sector remains cautiously optimistic. The UAE’s strategic location, well-developed financial market, big consumer base and localized drivers will continue to make it one of the most attractive markets in the GCC. 

  • Complicated façade and envelope specialists (mega tall towers, museums, complex architectural buildings)

  • Theme park specialists (sub-contractors and consultants)

  • Museum specialists (consultants, exhibition subs, special systems)

  • Consultants with extensive experience in construction methodology and sequence, clean demolishing technologies, large scale steel structure subs (for high rise buildings and commercial complexes), and healthcare (for hospitals and laboratories)

  • Healthcare service providers and special system sub-contractors

  • Rail specialists (consultants and sub-contractors)

  • Developers have indicated that opportunities exist for international companies that can provide best-in-class concept and scheme for mixed-use projects (residential and retail) and small retailer complexes since the market is currently saturated with big malls 

  • Facilities management

Web Resources
The National
Emirates 24/7 
Construction Week Online
Khaleej Times
Arabian Business
Gulf News
Gulf Business
BMI Research

UAE Government Websites
Dubai Municipality
Abu Dhabi Department of Municipal Affairs
Abu Dhabi Urban Planning Council
Emirates Green Building Council
Abu Dhabi Executive Council
Dubai Roads & Transport Authority
Abu Dhabi Department of Transport

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