Real Estate & Construction

Constructive Changes

Building Materials

A saturated local construction market and technological advancements in the industry are forcing private building materials companies to adjust their business models.

The high level of urban growth and infrastructure development that the Middle East has been witnessing over the past 10 years has turned it into an enormously lucrative market for global stone suppliers. According to Business News for Construction (BNC), a raft of new megaprojects valued at USD29.19 billion were launched in the Middle East and North Africa’s residential, hospitality, retail, healthcare and commercial sectors over the last 12 months.

The UAE is leading the way with projects worth USD11.57 billion, though most initiatives are being driven in the Northern Emirates, in particular Dubai, leaving Abu Dhabi construction players with a wave of regulatory requirements that tend to bump costs too high to remain competitive. Not to mention, the great bulk of construction-related projects in Abu Dhabi are government-led. Assuming external factors remain unchanged, what is next for local private construction firms?

The first strategy calls for growing export capacity. Some players, like Al Hashem Marble, have already crossed the Emirate’s borders, and rightly so: “We are also quoting projects in Saudi Arabia, which is a different market in terms of the approach to contracts and work,” CEO Kamil Abu Ghanem told TBY. But the Kingdom is not alone in offering Abu Dhabi companies with opportunities. The GCC alone accounts for 20% of the global stone market, creating a regional market worth an estimated USD5 billion that is only expected to increase to a demand for 19.6 billion metric tons of stone by 2020. For this reason, Abu Dhabi firms are looking to diversify their portfolios and increase their export shares. In doing so, they can benefit both from lower transportation costs and higher industry standards that are more likely to meet requirements set by clients in the region.

The second strategy consists of maximizing technological expertise to win out in such a competitive ecosystem. Among the most recent developments, the industry has seen the rise of 5D building information modeling, which is the combination of 3D physical models of buildings with cost, design, and scheduling data; digital twins, which are virtual models of a process, product, or service; and virtual reality tours. These advanced methods determine the most efficient time, location, and strategy for land moving, as companies can now analyze geologic surveys, equipment-demand projections, and forecasts. The application of these technologies to a relatively conservative industry such as construction has the potential to turn Abu Dhabi building materials firms into global leaders.

Overall, there is space for optimism. There will be natural adjustments made by the regulatory bodies and a natural growth process, but without significant reshaping or overhauling. In the words of Exeed Industries CEO, Felix Moral, “There is a great deal of trial and error left to work through. Right now, we have to invest in order to be prepared for this change.”