United Arab Emirates - Commercial Guide
Architecture, Construction, and Engineering (ACE)

This is a best prospect industry sector for this country.  Includes a market overview and trade data.

Last published date: 2020-09-12

Overview 

  • A key driver of the UAE economy.
  • The pandemic and oil price slump continue to have a negative impact. The second quarter of 2020 was the weakest second quarter of the year so far due to COVID-19 pandemic, lower oil prices, tightening national budgets, and the timing of Ramadan.
  • Second only in size to Saudi Arabia when planned and unawarded projects are included with $926 billion in projects planned or underway across all sectors.
  • New construction projects worth $3.1 billion were announced across the GCC in May 2020 with UAE contributing 55% of the value of total new announcements followed by Saudi Arabia with 29%.
  • The Oil and gas sector led with $1.7 billion in new projects while projects worth $1.2 billion were completed in May 2020.
  • The UAE came third in value of contracts inked, with $461 million in June 2020, slightly more than the $427 million signed in May 2020.
  • ADNOC Onshore, majority-owned by Abu Dhabi National Oil Company (ADNOC), signed the biggest deal in the country in June, with a $103 million deal for the third phase of the Bab gas project.
  • Major developers are seeking out new debt facilities in order to help fund new building projects. This should ensure injections of much-needed liquidity into the construction sector, a cause for optimism.

Dubai is preparing for the World Expo, October 2021 to March 2022 in Dubai. The Expo drove investments in tourism-related projects, commercial infrastructure, and transportation development including aviation and metro projects.

Dubai announced measures to provide financial support for contractors as part of an economic stimulus package totaling $408 million to offset the severe downturn in the construction industry caused by COVID-19. Support measures focus on accelerated payments and the return of financial guarantees. This package follows an earlier decision by the Dubai government to cut capital spending by 50%, and review existing contracts and projects. In March, the federal cabinet approved economic support measures that include improved payment terms for contractors working on government contracts, as well as exempting companies from penalties that arise from delays caused by the pandemic crisis.

According to research by the MEED group, the cabinet directed federal ministries to pay contractors and supplies within 15 days, while for contract delays, suppliers affected by the pandemic are exempted from fines for delays on federal government contracts for a renewable period of three months. The cabinet also directed that small and medium suppliers should be awarded 90% of federal government purchases.

Recent projects include:

Dubai:

District 2020, the expansive Expo 2020 Dubai venue.

The Dubai Metro Red Line extension (part of the Expo 2020 initiative).

The Dubai Harbor Creek project – a waterfront development spanning more than 20 million square feet, Burj Jumeirah.

Hatta Hydro-Electric Power Plant.

The World Islands.

Abu Dhabi:

Al Jurf, Sahel Al Emarat.

Jubail Island.

Guggenheim Abu Dhabi.

Zayed National Museum.

Noor Abu Dhabi the world’s largest single-site solar project in Abu Dhabi.

Mohammed bin Rashid Al Maktoum Solar Park, phase 5.

Leading Sub-Sectors 

Residential 

The two major cities, Abu Dhabi and Dubai, dominate the residential construction market. In Dubai, 69% of expatriates working in Dubai don’t have university degrees and most likely have low-paying jobs, obliging more than 33% of them to rent in the less expensive emirates and commute to Dubai.

The middle and higher-end of the Dubai residential market has an oversupply, leading to a decline in prices of 30 percent since the market peak in 2014. The protracted decline has prompted Dubai authorities to take steps to reduce construction of new developments in an effort to reduce the overhang of supply.  A total of 31,000 residential units opened in Dubai in 2019, comprising approximately 23,600 apartments and 7,400 villas, with communities such as Damac Hills, Dubai Hills Estates and Akoya Oxygen accounting for the bulk of completions. Abu Dhabi had approximately 26,000 units completed in 2019, located at The Gate Project in Masdar City, Saadiyat Island, Alghadeer project, and Yas Acres.

Office Market 

The commercial sector in Dubai expanded by 3.1 million square feet of new office space in 2019 while total office stock for Abu Dhabi reached 3.8 million square meters of space available for rent.

In Dubai, the oversupply has created a slowdown in office construction. Investors continue to be interested in well-located Grade A assets. Abu Dhabi also had a decreased demand for office space in 2019, largely as a result of reduced business growth and corporate restructuring. There is downward pressure on rents.

Retail Market 

Prior to COVID-19, experts predicted that Dubai’s retail sector would grow at over 5% per year over the 2018-2023 period, supported by strong international visitor spending and growing e-commerce activity, according to an analysis conducted by the Dubai Chamber of Commerce and Industry in 2019.  Projects include Dubai Square Overview, Deira Islands Mall in Dubai, Forsan Central Mall in Abu Dhabi, and Avenues Mallin Sharjah.

Hotel Market

In November 2019, UAE led Middle East hotel construction with 53,000 rooms in the pipeline, about 30% of the market's existing supply. Dubai continues to increase its hotel room inventory ahead of the World Expo. Dubai had a total of 132,000 guestrooms by the end of 2019 and will have more rooms operating when the World Expo opens. Abu Dhabi is expected to have at least 3 planned hotel openings and 7,281 new rooms. Ras al-Khaimah, Sharjah, and Ajman round out the top 5 with 17, 15, and four projects respectively.

Healthcare Market

The UAE continues to roll out major healthcare projects to develop a world-class healthcare infrastructure. According to Business Monitor International, healthcare expenditure in the UAE is expected to reach to $21.3 billion by 2021.  There are 700 healthcare projects worth $60.9 billion under various stages of development. In Abu Dhabi, many projects are under development such as Burjeel Medical City and Danat Al Emarat Hospital for Women and Children.

Dubai Health Authority (DHA) announced that a total of 12 new private hospitals will open in Dubai by the year 2020 totaling the number of private hospitals in Dubai to 38. The authority revealed that the number of private medical health facilities in Dubai witnessed a 4% increase in the second quarter of this year compared to the first quarter, totaling the number of private health facilities to 3,018, including 26 hospitals and 1,624 specialized and general medical complexes.

In addition to the 26 hospitals opening this year, the authority’s Health Regulation Department announced that there would be 12 new private hospitals in the next three years that will provide patients with 875 beds in addition to seven other hospitals that are undergoing expansions to include 750 beds.

Leisure Market

The UAE has evolved into a major leisure hub in the region with nearly 20 theme parks opened or in the pipeline. One of the biggest parks is Dubai Parks and Resorts which opened in 2016 and currently includes four themed parks and two entertainment areas. The 40-million-square-foot complex known as Meydan One, with the world's longest indoor ski slope, is planning to open in 2021. Abu Dhabi has many attractions including: the Louvre Abu Dhabi, the largest art museum in the Arabian Peninsula that opened in 2017; Yas Waterworld that has been operating for seven years; and the Warner Bros. $1 billion theme park that opened in July 2018. Abu Dhabi will welcome another park in 2022 - SeaWorld Abu Dhabi, a next generation marine life theme park with a research, rescue, rehabilitation and release center.

Infrastructure Sector

Infrastructure projects are a key part of the expanding UAE economy. According to regional projects tracker MEED Projects, the country has 301 individual projects with a contract value of over $100 million at the execution stage. The total value of those projects is $93.6 billion. Recent projects included roadway, airport, and port upgrades in preparation for the upcoming World Expo and as part of the overall UAE economic growth strategy.

The UAE cabinet approved a $4.4 billion economic stimulus package in March 2020 that included measures to accelerate major infrastructure projects across the federation, cut the cost of doing business, support small businesses, and accelerate major infrastructure projects.

Abu Dhabi: Abu Dhabi revealed plans to launch infrastructure projects worth $2.72 billion under the public-private partnership (PPP) model as part of the Ghadan 21 accelerator program. This PPP initiative will cover municipal, social, and transportation developments and tenders for lighting, highway, and parking projects.

Dubai: Prior to COVID-19, Dubai planned infrastructure spending of over $2 billion.. Dubai's 2020 spending program has a commitment to proceed with public-private partnership (PPP) projects announced in 2019 focusing on power and water sectors.

Sharjah: Sharjah announced plans to spend $2.6 billion on infrastructure development as part of its 2020 budget, prioritizing capital projects such as roads and tunnels with a 2% increase from 2019.

Opportunities 

Despite tough competition from local property developers, many opportunities exist for U.S. firms to collaborate, consult, and contract for construction projects.  Foreign companies should be prepared to either register locally or pre-qualify with developers and government agencies in order to respond to tenders. 

A number of U.S. companies have already won projects for public sector projects, according to the press:

  • Parsons for infrastructure.
  • Jacobs for Route 2020 metro rail Dubai.
  • AECOM for Etihad Rail stage one.
  • HOK for Expo 2020 venue design.

The World Expo project (Expo 2020 Dubai) has awarded over 5,600 contracts so far, and 56% of all Expo 2020 Dubai contracts were awarded to small and medium-sized companies reaching the value of $653 million to support Expo 2020 Dubai's goal of promoting innovation and supporting small and medium-sized businesses. Tenders and business opportunities with Expo 2020 Dubai are available at the Online Market Place.

In addition, the UAE government will continue to encourage increased green construction activity, including the new institutional segment (government office buildings, hospitals and schools).

Local UAE contractors have expressed demand for international sourcing in the following specialized areas: 

  • Complicated façade and envelope specialists (mega tall towers, museums, complex architectural buildings). 
  • Consultants with extensive experience in construction methodology and sequence, clean demolishing technologies, large scale steel structure subs (for high rise buildings and commercial complexes), and healthcare (for hospitals and laboratories). 
  • Healthcare service providers and special system sub-contractors. 
  • Developers have indicated that opportunities exist for international companies that can provide best-in-class concept and scheme for mixed-use projects (residential and retail) and small retailer complexes since the market is currently saturated with big malls.  
  • Facilities management. 

Resources

Trade Shows and Exhibitions

The Big 5
Date: September 12-15, 2021
Venue: Dubai World Trade Centre

Key Websites

The National 

Emirates 24/7

Construction Week Online 

Khaleej Times 

Arabian Business 

Gulf News 

Gulf Business 

BMI Research

MEED

Arabhealth Online 

Expo 2020 Online Market Place

Dubai Municipality

Abu Dhabi Department of Municipalities and Transport

Abu Dhabi Urban Planning Council 

Emirates Green Building Council 

Dubai Roads & Transport Authority 

Abu Dhabi Integrated Transport Centre