What are our industry’s New Year’s resolutions?
As the curtains came down on 2016, it had been a challenging year as a whole, with the region experiencing an economic slowdown and the constant debacle of the oil prices. The hardest hit was Saudi Arabia: the kingdom saw many of its trusted players in the construction sector experience a tumultuous ride, with low liquidity and acute cash crunch.
But amidst all the uncertainty, the GCC saw some big project launches, and the delivery and handover of numerous high-profile developments. In Saudi Arabia last year, more efforts were made to empower low- and middle-income families, addressing their need for affordable housing. Dubai witnessed the grand opening of the Dubai Water Canal, as well as massive real estate launches, including Emaar’s The Tower, Dubai Holding’s Marasi Business Bay, and Jumeirah Central.
Craig Plumb, head of research at JLL MENA, agrees that 2016 has indeed been a challenging year for everyone. “It has been a relatively tough year for the real estate sector in the UAE, with both Dubai and Abu Dhabi experiencing a softening in performance. We would describe 2016 as a soft landing, with neither prices nor activity falling to the same degree as in the previous market downturn in 2008-2009.”
In 2016, the economic reality of the low oil prices constrained the funding capability of the regional governments, which in turn affected the contractors, forcing them to make some tough choices. Governments looked out for private sector involvement, and found alternative funding sources for their project requirements.
It has been an interesting year for Hill International, which has entered into a conclusive stock purchase agreement to sell its construction claims group to Bridgepoint Development Capital for $147m in an all-cash transaction. Jeffrey Badman, senior vice president for Middle East and Africa for Hill International, says: “For our construction claims group, 2016 was an interesting year, as governments and contractors in the region came to terms with the reality of oil at around $50 per barrel.
“The majority of our work was centred around assisting our clients to resolve claims and disputes, and providing expert services in formal dispute proceedings. Following the launch of our advisory services in the Middle East and Africa, we witnessed a strong level of interest in these services, due to the need for optimising both programme and corporate performance.”
Stepping into 2017, economic growth across the GCC is expected to remain subdued but steady, according to a report by Emirates NBD’s economic research team.
Higher oil revenues – with the average oil price expected to increase to $55 per barrel this year, from $44 per barrel in 2016 – should help with narrowing budget deficits and reduce some of the liquidity strains in domestic banking systems that were evident in 2016, the report stated. The UAE’s GDP growth is expected to accelerate to 3.4% in 2017, from an estimated 3% in 2016. Within the UAE, Dubai is expected to grow at a slightly faster rate than Abu Dhabi, given its infrastructure investment programme ahead of Expo 2020.
Plumb agrees, explaining: “In general terms, Dubai is likely to outperform Abu Dhabi in 2017 [...] due to a combination of factors, including the timing of market cycles, the more diversified nature of the Dubai economy, and the necessity to complete more projects in the emirate ahead of Expo 2020.
“There is also likely to be continued interest in alternative real estate assets, with sectors such as schools and healthcare potentially outperforming more traditional real estate assets classes, such as retail and hotels, in 2017.”
For MEP supplier, Fischer, 2017 will present another 365 days to reinvent company strategies. Jayanta Mukherjee, the company’s Middle East managing director, says: “We can correct our mistakes, be more aggressive, bring in new products, offer better work-life balance to our employees and, above all, benefit from the new projects that will be added to the skyline of our region.”
Mukherjee says improved customer service will be the priority this year. “Today, product differentiation is no [longer] the key to success in our industry. It is service above customers’ expectations that decides who rules the turf. So we will challenge ourselves in every touch point of customer service.”
Similarly, UAE-based construction and property consultancy, Thomas & Adamson, is looking forward to positive and sustainable growth in 2017. As oil prices appear likely to continue to improve, and with government spending expected to pick up again, the stage is set for the infrastructure sector’s recovery, says Zander Muego, regional director of construction and property consultants at Thomas & Adamson.
“We expect ongoing investment in key sectors, such as tourism, hospitality, and residential. Therefore, we expect 2017 to see continued and steady growth in the UAE construction sector. However, the UAE market will remain competitive for project management and cost management consultancies; clients will continue to focus on competitive tendering and companies will be expected to deliver within a framework of tight margins.”
Despite this, the firm has set ambitious targets for its UAE operations in 2017. Muego concludes: “We expect to achieve further revenue growth, and build strong and positive relationships with our clients.”
Courtesy Construction Week