The sustained twenty-year growth of construction in the UAE is amazing. But as oil prices continue to drop, many are fearing a recession is about to hit the business, particularly in the issuing of public sector contracts. So are industry insiders being over-optimistic by claiming otherwise? Luiza Karim profiles one of the most lucrative industries in the UAE.
In many countries the construction industry is a volatile one, with
economic cycles having a great effect on investment in new construction
projects. However, in the UAE, the past twenty years have seen a steady
flow of ever-more ambitious construction projects being commissioned.
The construction industry in Dubai is unique for this sustained growth.
The race for the skies in the UAE has been enabled through the enormous
financial benefits made from the discovery of oil. The government and
the private sector regularly commission an incredible variety of
ultra-modern high rises. Keen to outdo each other with bigger and better
structures, there are now even more weird and wonderful buildings
looming on the horizon and according to industry heads, the order books
are going to continue to be filled.
“Work looks good for the next 18 months as we have a lot of current
projects. New contracts are likely to roll during the course of the
year,” said Nigel Poole, contracts manager at Al Habtoor Engineering
Enterprises.
Al Habtoor Engineering Enterprises and their South African associate
partners Murray & Roberts Contractors (Middle East) are on a roll at the
moment, having recently won three major contracts in Dubai.
They were awarded the Dh538 million (US$146.5m) contract to construct
the concourse building for Dubai International Airport’s expansion as
well as a Dh20 million (US$5m) contract for the fit-out and finishings
package at the Jumeirah Beach Hotel.
The consultant and project manager on the airport development is the US’
International Bechtel.
The joint venture company was also awarded the Dh148 million (US$40.3m)
contract to construct the Kendah House project. The 155 metre, 39 storey
tower block on Sheikh Zayed road will house offices and is scheduled to
be ready by the end of 1999.
Most of the projects in the UAE involve foreign architects and
consultants who have found plenty of work as business success funded
expansion. The availability of space and efficient regulations have
meant that architects could turn a rich man’s dream into an extravagant
reality. Today’s situation has not altered that much. Business is still
booming and land and money are plentiful, both of which are required to
sustain the growth.
However, as building regulations are introduced competition between
architectural firms is becoming keen, as has competition between
contractors and architects.
While the route of owner/client approaching an architect who recommends
a contractor has been the standard way, many big projects are often
handed directly to a contractor who chooses an architectural company to
execute the design.
Architects are still allowed to operate independent of a local partner,
unlike contractors who must tie up with a domestic company. This will
change by 2005 when architects will have to abide by the same
regulations.
In the UAE architects and project consultants take around five per cent
of the project cost, but it does vary. In Abu Dhabi, for instance,
projects relating to the government-controlled Khalifa Committee have a
fixed rate of four per cent.
“Good foreign architects are proving themselves, but there a lot around.
Despite the good prospects and the abundance of projects, the
competition is stiff,” said Attalah Saeed, principal architect of UK
based WS Atkins.
“There is plenty of work this year for large scale projects, such as
banks, office towers and heavy civil infrastructure,” said Saeed.
As for how many super-projects Dubai can handle, such as the much talked
about Jumeirah Beach complex, the super-high Emirates towers and the
National Bank of Dubai, there seems to be no end in sight.
“There is enough space to absorb these large buildings in Dubai and
although there is a lot of competition among architectural design firms,
the good ones are doing well,” said Saeed.
Some government officials argue that the dominance of foreign architects
and contracting companies in the Gulf has not benefited locals and
subsequently the national economy.
“We know we cannot do without the foreign expertise for our industry but
we could have had at least 10 per cent nationals in this industry, if we
had tried to achieve it,” said Mohammed Khalifa Al Habtoor, chairman of
the Federal National Council. Ahmed Saif Belhasa, chairman of the UAE
Contractors’ Association, said that local construction companies should
get preference over foreign contractors in government projects.
“If no local company is found able enough to execute the project, they
should team up with foreign firms and gain the expertise they need,” he
said.
He also called for a bigger role for Gulf-based local contractors so
that they can play a role in the building of their economies.
According to Belhasa, 85 per cent of construction contracts are awarded
to foreign companies, sidelining Gulf-based contractors as Arab
countries spend 80 per cent (US$30 billion annually) of construction
revenues on purchasing building equipment and materials from foreign
countries.
Western foreign architects retaliate by saying that they only get called
in on certain projects or western expatriate residential complexes and
that contractors, usually of local origin, yield a lot of power.
“There are few local architects as it has not been a popular choice of
career. That is changing but obviously it will take time. Many Middle
Eastern architects work for Western architect firms as they are among
the best,” said Zandi.
Furthermore, large projects are often handed directly to the contractor
who either has the design work done in-house or chooses an architectural
company to execute the design.
This practice can have severe drawbacks according to John Steiner,
director at interior design firm Cityspace.
“If everything is done in-house, there is no incentive to be creative
with the design as it might sound controversial and people are afraid of
losing work as a result. If architects and interior designers
collaborated together there could be more dynamic and better quality
buildings,” he said.
Repeated calls have been made by the UAE Contractors’ Association
chairman Ahmed Saif Belhasa on the need to introduce standardised
construction codes on building materials and practices.
“The absence of a uniform building code for the UAE means that engineers
and contractors are not bound by specific regulations, with some using
British, European or American codes,” he said.
While many foreign architects interpret this to mean that a UAE
construction code will be introduced, few doubt that it will be based on
European and US regulations and that it will take years to implement as
federal government in Abu Dhabi will have to approve it first.
“I don’t think it’s such an issue as foreign architects follow their own
country specifications. We at WS Atkins follow British standards and
most of Dubai Municipality’s standards are based on British standards as
well,” said Saeed.
There might be a lot of commercial buildings in Dubai but there is not
much decent office space, according to Cityspace’s Steiner.
Landlords of commercial buildings would benefit financially if they
invested more in good office space design and encouraged architects to
work closer with interior designers, said Steiner.
The current practice of placing the services, such as the lifts, water
and power facilities, and fire escapes, in the centre of the building,
leaves little room for flexible space arrangement.
“More floor space could be made available by designing the services on
the perimeter of the building and leaving the central area free,”
explained Mehdi Moazzen, design director of Cityspace.
“Multinational companies in particular are looking for flexible work
spaces where they can expand their activities and actually, there are
very few buildings that have large clear spaces without pillars or
service areas,” agreed Steiner.
Calling for a design association to be set up in the UAE, Steiner
believed that it would give architects and designers the opportunity to
discuss current procedures and ways of improving standards.
A common complaint that companies make is working in a building that has
several floors of residential flats in them, as it means that services
are shared and that the original design is usually made for residential
purposes and not commercial.
“I would prefer to have my office in a building that is entirely
commercial. I don’t want my clients to come into a building where you
can smell food or hear babies crying,” one company manager said, whose
office is on Sheikh Zayed road.
“There generally seems to be some confusion as to who the landlord is
trying to attract. Many believe that by doing a multi purpose building
they are improving their chances of following market demand,” said
Steiner.
The question remains whether Sheikh Zayed road is supposed to be a
residential neighbourhood or a high flying business area and what the
long term plans are, if indeed there are any.
But in the long run, a well constructed and designed sole purpose office
block building is likely to make more money as there are few of them,
despite the impressive exteriors.
Many companies that set up offices a few years ago with less than a
handful of staff have grown and now require more office space but few
buildings can provide an additional floor and new premises are sought.
“There is definitely a demand for high quality modern design office
space environments where companies can play around with the space and
install themselves according to their wishes,” said Steiner.
But according to civil engineers, Dubai is suffering as a result of the
cut throat competition and quick buck attitude of investors who are not
interested in long term quality.
“The question is how cheap and how fast can you build it. Investors are
interested in getting their money back as quickly as possible and set a
very short time frame,” said Shakir Al Kubaisi, regional chief executive
of Maunsell.
Most designers agree that tough fee competition is a problem and as a
result, consulting engineers are forced to consider cheaper alternatives
to fit the budget and the time frame.
“Quality suffers because investors are not interested in building
something that lasts. Buildings are slapped up at amazing speed and then
need to be torn down or undergo major repairs less than a decade down
the line,” argued Marco Malpiedi, general manager of Cowi Al Moayed
Gulf.
Nonetheless, with over $2 billion worth of new projects pending in Abu
Dhabi, the UAE looks set to enjoy another good year in the construction
industry.
According to a report in Middle East Economic Digest, an upturn in Abu
Dhabi’s industrial construction activity will help offset a projected
slowdown in Dubai for this year.
Two engineering, procurement and construction (EPC) contracts at a value
of US$1.5 billion are due to be awarded by Abu Dhabi National Oil
Company (Adnoc) in the very near future.
The largest is for the main plant package on the second phase of the $1
billion onshore gas development project, aimed at increasing gas
handling capacity.
The other EPC contract entails building a general utilities plant to
raise power, desalination and seawater cooling capacity at Ruwais to
meet the utility needs of new industry in the area, including the
expanded Ruwais refinery.
Adnoc is evaluating bids for the second main construction package which
covers the installation of new units, including an unleaded gasoline
facility, the report said.
The utilities plant will also serve Abu Dhabi’s Adnoc-Borealis
petrochemical venture when it eventually comes on stream. Five
international contracting groups have been invited to bid for the
construction of the 600,000 tonnes per year ethylene cracker by early
March.
The launch of a major power and water project, the Taweelah A-2, is also
due this year in Abu Dhabi.
The plant, which will have a capacity of 480-580 megawatts and 50
million gallons a day, will be implemented on a build-operate basis,
with the successful bidder taking a 40 per cent stake in a separate
utility company to be set up to run the company.
As is obvious, there is no end in sight as the contracts continue to
roll for the UAE’s builders. Other industrial construction projects
forthcoming include Dubai’s plan to upgrade the Jebel Ali D station,
expanding its installed generating capacity. The project is expected to
go for tender late this year and will be funded by Dubai government.
Roads and sewerage construction projects are expected to proceed in
Dubai, including the US$60 million expansion of the Al Awir sewage
treatment plant and the Sharjah-Dubai ring road project.
The building sector is expected to stay active in all the Emirates.
Several packages are still to be tendered on Dubai’s Emirates tower
project.
In Abu Dhabi, design and build bids for the estimated US$200 million
trade centre were due back late last month.
Sharjah is also aiming to implement the largest civil construction
scheme for many years with its US$120 million world trade and exhibition
centre on the Al Khan lagoon.