Sahel Majali, founder of Mid Group, discusses the release of new figures which compare construction costs in major Middle Eastern and North African (MENA) cities.
Construction Costs Index
Global design consultancy Arcadis has released its 2016 International Construction Costs Index. This annual survey compares the relative cost of building in some of the world’s major cities. The survey found that Doha, the capital of Qatar, was the most expensive MENA city for construction, ranking 12th out of a total of 44 cities on the Index. Jeddah in Saudi Arabia was placed 16th, and Dubai in the United Arab Emirates was named the 18th most expensive city in the world for construction.
Commenting on the Index, buildings global business leader at Arcadis Middle East, Ian Williamson, said: “Throughout 2015, the global construction market saw the overall level of cost inflation restricted due to the drops in commodity prices. Particularly when it comes to oil, growing uncertainty over prices will inevitably have a short to medium term impact on the [MENA] construction industry. The region’s major commercial centres of Doha and Dubai remain – for the time being, at least – relatively stable locations for developers, benefitting from access to inexpensive labour and energy.”
Online news agency Albawaba reported that Arcadis viewed Qatar’s construction sector as one of the biggest contributors to its non-hydrocarbon Gross Domestic Product (GDP) in 2014. The consultancy firm also said that Qatar plans to spend roughly US$150 billion on infrastructure building in the next decade to prepare for the 2022 Football World Cup, which will be held in Doha.
Explaining this further, the report revealed that this “growth is subject to supply and logistics and there is a danger of substantial building material inflation unless the supply chain is carefully managed.” It went on to explain that: “Pressure from other parts of the region is, nevertheless, reducing as spend is moderated as a result of falling energy prices. This means that further construction resources can be expected to meet local demand in Qatar.”
Turning their attention to Dubai, Arcadis wrote in the survey: “While oil is not a major part of the economy – Dubai’s main revenue comes from tourism, aviation, real estate and financial services – uncertainty associated with low oil prices and falling commodity markets can still have a big impact on the construction market.
“This, combined with falling real estate values, is leading to some uncertainty. With the value of project awards at half that of 2014, previous fears of substantial construction inflation have not materialised, which has led to a relatively stable position in our ranking.” Looking to 2016, Arcadis suggested that the initiation of several large-scale mega projects in preparation to host the World Expo 2020 could spur construction sector growth in Dubai.
Summing up the report’s findings, Williamson suggested that 2016 could be “another challenging year… for the [MENA] construction industry.” He explained: “With the steep fall in the price of oil, the timing of investment programmes across the Middle East has become uncertain. Declining commodity prices, low labour rates and a highly competitive Middle East construction market have given rise to more potential opportunities across newly-affordable markets. It is a good time for government, funders and developers to capitalise on their investment ambitions.”
Mid Contracting MENA
Arcadis’ 2016 International Construction Costs Index suggests now is a good time to invest in MENA construction. A number of factors such as declining commodities prices, low labour rates and a competitive market will make Middle East construction a more cost-effective investment in 2016. Meanwhile, upcoming events such as the 2022 Football World Cup will provide developers with new opportunities to initiate major infrastructure construction projects in the region, as we head towards the end of the decade.
Mid Contracting MENA has been delivering major constructing projects of the highest standards of quality and safety in the Middle East for more than 30 years. We’ve worked on a variety of prestigious infrastructure projects such as Abdali Boulevard, a luxury district in the centre of Amman, Jordan. This has supplied us with the skilled professionals, industry expertise and regional connections developers need to enter MENA’s lucrative infrastructure construction sector.