x Abu Dhabi, UAESaturday 20 January 2018

Few new building deals in Abu Dhabi

The value of new construction contracts in Abu Dhabi fell 81 per cent in the first quarter.

The flow of new construction projects in Abu Dhabi has slowed dramatically as the Government reassesses economic conditions.

The value of construction and infrastructure contracts awarded in the second quarter fell 81 per cent to US$843 million (Dh3.09 billion) from the first quarter, when contracts worth a total of $4.5bn were finalised, according to data compiled by Meed Projects.

The volume of contracts in the second quarter represents a 76 per cent drop from the same period last year, when deals worth $3.6bn were awarded.

"People are being a lot more prudent in their spending," said Chris Gordon, the group general manager of the Dubai construction company Al Habtoor Leighton. "A lot of big projects have been pushed out."

Al Habtoor Leighton was part of a partnership that bid last November to build a branch of the Louvre museum on Saadiyat Island. A shortlist of contractors was announced early this year and a contract award was expected by March, but that has not happened.

The list of large projects expected to be awarded in the first half of the year but not materialising includes the $3bn Mafraq-Ghweifat highway connecting the capital and Saudi Arabia. The road project was planned for three years as a private-public partnership. But last month construction industry executives were told the proposal was being re-evaluated and was likely to be re-bid as a traditional contract. Participants expressed frustration.

"We can't go through this whole project and then in the end they say 'we'll see what we do'," Gerhard Urschitz, the director of international projects for the Austrian construction company Strabag, said last month. His company was part of a consortium that was a finalist for the road project.

Contracts were also expected for a $572m sewage pumping station and an Al Ain hospital project for the Abu Dhabi Health Services Company. The delays are "not totally unexpected", said one construction industry executive, who asked not to be named. "We are all aware that there is a review of all government projects at the moment."

But the delays are having an impact on construction companies. Several contractors have shifted their focus from Dubai to Abu Dhabi in the past two years after the construction slowdown in Dubai.

More than $200bn worth of projects were in the pipeline in Abu Dhabi last year, Meed Projects reported. "Contractors are bidding on a lot of stuff and it's not being awarded," the construction executive said. "Companies are fairly lean, but if the awards are not flowing, they're going to have to cut further."

Most of the large projects are government-backed. Home developers such as Sorouh Real Estate have slowed project starts in favour of focusing on completing existing projects.

But projects such as the Saadiyat museums and the extensive road and transportation system planned for the capital will be completed, construction executives believe. But many will be pushed back for a least a year or two.

"In reality, there is a huge willingness to develop these projects, and I don't see that waning at all," said Peter Morrison, the group chief executive of the architecture firm RMJM, which designed the Capital Gate in Abu Dhabi.

With Abu Dhabi and Dubai slow to award contracts, many UAE builders are turning their attention to Saudi Arabia and Qatar. Saudi Arabia is expected to surpass Dubai as the region's largest construction market, according to Meed data.