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Dubai Construction Industry Outlook

Published On : 2018-06-11

UAE stands one of the major countries in the GCC region that is currently undergoing remarkable transformation in shaping up their future by exploring growth opportunities with high investment, technological advancement and government support. Although the country’s economy remains highly oil dependent, diversification to non-oil based sectors such as construction, finance, tourism and manufacturing is expected to drive the economy by 2025. According to the IMF estimates, the GDP of UAE is expected to rise to 3.4% in 2018. The economic growth of the country is largely supported by the key business activities in Dubai, considered to the country’s commercial hub.

Dubai, being the largest and second wealthiest emirate in the UAE, witnessed real GDP growth of 2.8% compared to previous year to reach US $105.9 billion according to Dubai Statistics Centre. The city has been considered to be have one of the diverse economy in the oil dependent GCC region as the non-oil based sectors such as construction, transportation and storage, manufacturing, retail contribute over 90% of the country’s GDP.

Dubai, considered to be one of the fastest growing economy globally is increasing being contributed by the growth of the construction industry in the city. According to Dubai Statistic Centre, the construction sector excluding the real estate infrastructure segment witnessed a growth of 3.5% in 2017 compared to 2016 and contributing 6.3% to the real GDP in 2017. Furthermore, with government focusing on infrastructural developments such as development of roads, metros, bridges and marinas, the growth of construction industry is further expected to surge in the upcoming years. In 2017, the government approved its largest ever budget of $15.4 billion for 2018, an increase of 19.5% compared to 2018. As a result of this, the infrastructural spending is set to increase by 46.5% in 2018, and holding a share of 21% of the total government expenditure.

The upcoming Expo 2020 being held in Dubai and expected to attract 25 million visitors has given rise to the need to infrastructural expansion. With the estimated investment for Expo 2020 event being over US $6.5 billion, the government allocated over US $1 billion in its 2018 budget to finance on expo related infrastructural projects. In addition to this, construction activities such as the Dubai metro expansion for setting up the Expo 2020 is also further creating growth opportunity. The 15km route expected to be completed by 2019 will link the Nakheel Harbour and Tower station to the Expo 2020 site.

The growing tourism industry in the city is witnessing a positive growth trend owing to rising number of tourists and infrastructural expenditure along with development of new projects. According to Dubai Department of Tourism and Commerce Marketing, the city witnessed 15.8 million tourist arrivals in 2017 and witnessing a 6.2% growth compared to previous year. Several newly opened projects such as the Dubai Canal, Dubai Safari Park and Dubai Frame are further driving tourists into the city. Additionally, several planned projects such as the Bluewaters Island featuring a 210 meter Ferris Wheel, Six Flags Dubai, a theme park spread over 3.5 million square feet area, and the eco-tourism project launched in 2018 will further establish Dubai as a major tourist destination globally.

Real estate infrastructure will continue to grow in Dubai owing to increasing confidence amongst the consumers. According to the Dubai Statistics Center, the real estate segment accounted for 7.1% of Dubai’s real GDP growth with increase in 7.3% growth in 2017 compared to previous year. According to the Dubai Land Department, 69000 real estate transactions were recorded with estimated valued over US $77 billion in 2017. Additionally, the real estate segment also attracts high foreign investment which also acts as a key market driver. For instance, according to the Dubai Statistical Center, in 2016, the real estate sector attracted over US $7 billion of foreign trade investment in 2017 and witnessing a growth of 6.6% compared to the previous year. Furthermore, according to the Dubai Chamber of Commerce, the value sales of land, buildings and units amounted to around US $31 billion in 2017. Growth in residential and commercial segment is also creating favorable conditions for the infrastructural sector. It has been estimated that over 37000 residential units are expected to be delivered by 2018. In addition to this, ongoing and new projects such as The Residences at Marina Gate, Dubai Harbour, Azizi Grand, The Villages will further help in driving the construction industry.

Growing technological advancement is also creating new growth opportunities in the construction sector. Technologies such as usage of 3D printing, BIM modelling are some of the latest trend witnessed in the construction industry. For instance, use of 3D printing in infrastructural projects helps in reducing the construction costs as well reduce the delivery time frames. As a result of this, use of this technology is expected to substantially increase in this market. In 2016, the government introduced the Dubai 3D Printing Strategy with the aim to create Dubai as the leading hub of 3D printing technology. As a part of its goal, the government plans to make 25% of the city’s buildings to be built using 3D printed technology.

Additionally, growing infrastructural developments in other different industries such as retail, hospitality, transport, manufacturing and energy offers high growth opportunities for the construction industry. Furthermore, increasing foreign investment in the city along with focus on technologies is further expected to boost the construction industry and boost the city’s economy in the upcoming years.

Some of the leading players operating in the construction industry include EMAAR Group, Nakheel Properties, Arabtec Construction, DAMAC Properties, Dubai Properties Group, Majid Al Futtaim and others.