Energy & Mining

More Ground to Break

Used to weathering the cyclical nature of the industry, Abu Dhabi's construction sector is slowly realizing adapting and innovating is the only way forward for sustained, long-term growth.

Abu Dhabi’s construction industry has shown to be relatively reliant despite the slump in oil prices, as new projects continue to break ground and come online. Though values for property may have seen some decline over the past three years, building costs and materials have not witnessed major fluctuations. However, the market is likely to maintain its current configuration in the short- to medium-term, and innovation coming through the adoption of new materials and entry to new markets suggests only few players will witness growth in the long term unless there are major top-down shakeups.

As such, the government has made calculated efforts to ensure the construction industry continues to strengthen the Emirate’s non-oil economy. In June 2018, Crown Prince Mohammed bin Zayed announced a three-year AED50 billion stimulus package that consists of 10 initiatives set to create thousands of new jobs for Emiratis and develop the non-oil economy, setting in motion a broad review of the Emirate’s building and construction regulations for both commercial and private projects. The Crown Prince hopes the measures will result in reducing the cost for developers, as well as spurring more urban development projects. Following the announcement, UAE construction and property stocks rose across the board, with Abu Dhabi Company for Building Materials rising as much as 7.27%.

The new regulations will also include instant licensing for nearly every type of commercial license as well as all government services; a new streamlined—and faster—method of payments to private sector contractors and an evaluation of fines caused by those delays; and a comprehensive review of regulations with the goal of cutting costs for commercial and residential property and infrastructure projects.

Perhaps the most high-profile construction project in the Emirate’s recent history opened in November 2017. The Louvre Abu Dhabi is the result of a 2007 agreement between the governments of Abu Dhabi and France. With a cost of over USD1 billion, with reports suggesting as much as half of that was paid to France for the leasing of the name, the Louvre was a joint venture between Arabtec, the Spanish Constructora San Jose, and Oger Abu Dhabi.

The Emirate’s major projects, however, are hardly confined to the tourism sector. In March 2018, Abu Dhabi reached a milestone and became the first in the region to build a nuclear reactor. The Barakah power plant is set to be the first of its kind in the Arab world. All four of the plant’s reactors are being built by Korea Electric Power Corporation. Construction of the last of Barakah’s four units is expected to be completed by 2020, with each reactor coming online successively, and with a total estimated cost of around USD24.4 billion.

Within the Emirate’s transportation sector, work is underway for a massive, USD7-billion expansion of Khalifa port. Already among the fastest growing ports in the world, at 100sqkm, the expansion project will see an additional 600,000sqm of space for handling cargo. Khalifa port’s TEU capacity will also nearly double, adding 2.4 million TEUs to the port’s existing capacity of 2.5 million TEUs. The port will also be deepened, from 16m to 18m, to allow the world’s largest cargo ships to berth. It is anticipated to be completed before the end of 2018.

The largest project underway currently in Abu Dhabi is the state-of-the-art Midfield Terminal at the Abu Dhabi International Airport. Set to open in 2019, the project is widely lauded as being the terminal of the future, with the CEO of the airport calling the terminal the pride of the Emirate. The megaproject has brought together more than 15,000 workers in its construction. When complete, the nearly 750,000sqm terminal will have an annual passenger capacity of 84 million, with the ability to handle 11,000 passengers per hour and 19,200 pieces of luggage per hour. Additionally, some 35,000sqm will be devoted to duty-free shopping, entertainment, and dining options.