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| MARCH 2015

THE DEFINITIVE GUIDE TO THE REGION'S CONSTRUCTION PROFESSIONALS

Over a Barrel Is the GCC’s construction market really dependent on the oil price?

Is there enough demand in the industry to keep contractors engaged? MD of Drake & Scull Engineering talks about working through the odds Has the UAE's sustainable measures impacted the building sector?

Construction Business News ME March 2015 1


700+ Projects Delivered

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s n o i t u l o S d e t a r g te End to End In

project experience

130+ years of

ISO 9001, 14001 and OHSAS 18001 certiďŹ ed

Pioneering Engineering Construction since 1881

For over 130 years, Drake & Scull International PJSC has been shaping skylines and transforming the lifestyle of communities around the world.

Drake & Scull is an industry leader, with a proven history of delivering more than 700 projects through its General Contracting, Engineering, Rail, Oil & Gas, Water and Wastewater Treatment and Infrastructure development business streamlines across the region.

www.drakescull.com 2 Construction Business News ME March 2015


CONTENTS

NEWS 8 UAE 12 MIDDLE EAST

34

14 WORLD 16 in person

MD OF DRAKE AND SCULL TALKS ABOUT STAYING AHEAD OF THE GAME IN A COMPETITIVE MARKET

26 analysis

IS THERE ENOUGH DEMAND TO KEEP THE CONTRACT AWARDS COMING?

32 architecture

DR VARKKI PALLATHUCHERIL DISCUSSES THE CHANGING ROLE OF ARCHITECTS

34 sustainability

CBNME OBSERVES THE GREEN MOVEMENT IN THE CONSTRUCTION SECTOR

cover story "WE THINK IT IS UNLIKELY THAT THE CONSTRUCTION INDUSTRY WILL BE INFLUENCED BY THE OIL PRICE IN QATAR IN THE SHORT TERM"

50

20 over the barrel IS THE GCC’S CONSTRUCTION MARKET REALLY DEPENDENT ON THE OIL PRICE?

38 in the field – NICK SMITH

AZIZI DEVELOPMENTS BUILD LUXURY AND AFFORDABLE HOUSING IN AL FURJAN Construction Business News ME March 2015 3


CONTENTS

38

Managing Director Walid Zok walid@bncpublishing.net Director Rabih Najm rabih@bncpublishing.net Director Wissam Younane wissam@bncpublishing.net Group Publishing Director Diarmuid O'Malley dom@bncpublishing.net Business Development Director Rabih Naderi rabih.naderi@bncpublishing.net Sales Manager Elly Shirkhan elly@bncpublishing.net Features Editor Lorraine Bangera lorraine@bncpublishing.net

42 PROJECT REVIEW AL HAMRA VILLAGE SHOWCASES EXPANSION PLANS AT ITS OLDEST MALL

46 Q&A

CONTRIBUTORS

CEO OF IHCC DISCUSSES THE PERKS OF HANDLING A SPECIALISED BUSINESS

50 forcast

REAL ESTATE EXPERTS PREDICT THE POTENTIAL MARKET FOR 2015

54 latest

ITALIAN DELEGATES MAKE THEIR WAY TO THE UAE MARKET

56 comment

MOHAMAD ITANI WRITES ABOUT AFFORDABLE HOUSING IN KSA

Marketing Executive Mark Anthony Monzon

16

Rana Husam Shiblaq Stuart Matthews Marlow McGuinness Ltd

SUBSCRIBE subscriptions@bncpublishing.net PO Box 502511 Dubai, United Arab Emirates P +971 4 4200 506 | F +971 4 4200 196 For all commercial enquiries related to Construction Business News ME contact elly@bncpublishing.net T +971 55 339 5097 All rights reserved © 2015. Opinions expressed are solely those of the contributors. Construction Business News ME and all subsidiary publications in the MENA region are officially licensed exclusively to BNC Publishing in the MENA region by Construction Business News ME. No part of this magazine may be reproduced or transmitted in any form or by any means without written permission of the publisher.

58 events 62 editor’s pick 4 Construction Business News ME March 2015

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b

Porto Arabia Towers Doha, Qatar

Mall of Qatar Doha, Qatar

Viva Bahriya Towers Doha, Qatar

Qatar National Museum Doha, Qatar

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For nearly four decades, owners and developers in the Middle East have turned to Hill International to manage their construction projects and programs throughout the region. Hill is proud to have helped our clients turn their most challenging visions into realities. We have participated in over 10,000 projects with a total construction value in excess of $500 billion, managing all phases of the construction process from concept through completion. Hill is also the leading construction claims firm in the world, having helped resolve problems on some of the most complex projects throughout the Middle East and around the world. To minimize risk and maximize results on your next project, turn to Hill International


THE INAUGURAL ISSUE

UNDER CONSTRUCTION...

DRILL DOWN

WELCOME

WHAT'S THE CONCEPT?

EXTENSIVE INDUSTRY INSIGHTS FROM THIS ISSUE ONWARD

On behalf of our team at BNC Publishing, this introductory note presents the inaugural issue of Construction Business News ME (CBNME). As a B2B title, CBNME addresses industry experts and specialists directly, and aims to put forward sectorrelevant interviews and information to both foster knowledge and mark landmark growth in the Middle East. After the financial crisis in 2007/2008, the construction industry has finally started moving on an upward trajectory from 2014. The progress since then is phenomenalcountless upcoming projects have been announced for the near future. Additionally, the UAE winning bid for Expo 2020 and Qatar winning the bid for the FIFA World Cup 2022 has further bolstered the alreadystrong sector even further. At the 2015 Government Summit, HE

Hussain Nasser Lootah, Director General of Dubai Municipality, talked about making Dubai a smart city with integrated communities. As the government aims to turnaround the spending by focusing on social infrastructure and sustainability, the construction sector will need to make drastic changes to keep up with the trends in the market. This month, our cover story looks into the impact of the decline in global oil prices on contractors in the GCC. While the slump in oil revenues will hit some countries harder than others, it does seem that key markets like Saudi Arabia, Qatar and the UAE will be relatively unaffected in the medium term. We also look at the ramifications of “green” regulations in the construction industry as well as what the real estate industry has coming in 2015.

C

M

Y

CM

MY

CY

BETTER, LITTLE PLAIN?

K

A LITTLE MORE DEPTH?

DIARMUID O’MALLEY

Group Publishing Director

“According to the Dubai Statistics Report, in Dubai alone, the construction sector contributes to 7.89% of the GDP. The GCC region, without a doubt, has enormous construction capacity. Construction Business News ME will focus on giving the readers quality insights into the industry with the help of reliable experts across the region. I look forward to working with trusted partners across the construction sector.”

6 Construction Business News ME March 2015

CMY

PERFECT


Construction Business News ME March 2015 7


NEWS UAE

THE ONYX PROJECT COMING UP SOON IN SHEIKH ZAYED ROAD, DUBAI

Harbor’s portfolio advances to AED 15 billion DUBAI - Harbor Real Estate announced that it concluded service contracts and transactions exceeding AED 2.8 billion during their 2014 fiscal year. Harbor’s growing number of institutional clients include National Bonds Corporation, Al Mazaya Holding, Investment Corporation of Dubai, Al Thani Investments, Daman Investment, Tadhamon Islamic Bank, Global Investment & Development, Amlak Finance, and ASGC Investments. Mohanad Alwadiya, Managing Director of Harbor Real Estate, said, “We have an exclusive portfolio that is worth over AED 15 billion covering 6,000 mixed-use properties all over Dubai.” Harbor’s integrated real estate services cover research, valuation and advisory, property asset management, marketing sales and rental, and CRM, handover and project management services.

HARBOR REAL ESTATE’S SKYCOURTS TOWERS IN DUBAILAND

NEW ONYX PROJECT SET TO LAUNCH MIDMARCH THIS YEAR DUBAI – Ishraqah for Development’s upcoming project, The Onyx, will be officially launching on March 15. The building will be situated close to Emaar Business Park adjacent to Sheikh Zayed Road. The project is an AED 1.3 billion three-tower development that is in its final completion stages. Comprising of three towers, the project will include a 14-storey commercial tower, a 24-storey mixed-use commercial and office tower, and a four star luxury hotel with 200 rooms and 10 suites. All three towers share a common three floor platform of retail outlets and restaurants. Works on the first two towers are progressing on schedule with the structure work of both towers complete. The hotel tower is expected to be structurally complete by mid-March, with work on its façade to follow. MEP work, block work, paint and finishing are all at an advanced stage, with the development benefiting from a fast-track programme introduced last year. 8 Construction Business News ME March 2015


ETIHAD RAIL PARTICIPATES at IDEX 2015 ABU DHABI - Etihad Rail, developer and operator of the UAE national railway network, participated at this year’s International Defence Exhibition & Conference (IDEX), which took place from February 22 - 26 at the Abu Dhabi National Exhibition Centre. This was Etihad Rail’s first appearance in the major defence event and accordingly highlighted its partnership with the UAE Armed Forces. As part of the agreement between two entities signed last year, the UAE Armed Forces will provide protection

for a number of Etihad Rail's facilities and installations including stations, terminals, yards and depots. Once fully operational, Etihad Rail will extend its relationship with the military as it will provide a link for five key military logistics centres operated by the UAE Armed Forces and the Ministry of Defence. Etihad Rail was represented at IDEX by a delegation of senior executives and industry experts who educated conference visitors on the railway's developments.

HH SHEIKH SAIF BIN ZAYED AL NAHYAN WITH ETIHADRAIL CEO FARIS SAIF AL MAZROUEI AT ETIHAD RAIL'S IDEX 2015 STAND

GCC insurance industry value rapidly increases DUBAI - Regional and international bancassurance and insurance experts gathered in Dubai for the Bancassurance MENA Summit from February 23 - 25 to discuss the impact of changing regulations, market trends and projections on driving profitability in the Middle East’s bancassurance sector.

The GCC insurance industry has almost tripled in value between 2006 and 2013, with insurance premiums increasing from US$6.4 billion to $18.4 billion. The UAE and Saudi Arabia are the largest insurance markets in the GCC, with nearly 80% of Gross Written Premium (GWP). GWP is the total premium writ-

ten and assumed by an insurer before deductions for reinsurance and ceding commissions. The UAE is the biggest and fastest-growing insurance market, accounting for almost 45% of the region’s GWP and has witnessed strong growth momentum with a 17% CAGR over the past six years. Construction Business News ME March 2015 9


NEWS UAE

A SCORCH MARK

AFTER THE TORCH SET ABLAZE, AUTHORITIES HAVE BEEN WORKING AT FULL THROTTLE TO GET THE TOWER UP AND RUNNING AGAIN. CBNME LOOKS INTO THE PROGRESS…

T

he fire at The Torch Tower occurred in Dubai Marina around 2:00 am on February 21 this year. Evacuation was successful and all fire safety systems functioned effectively leaving no casualties. The safety system also helped restrict fire damage to the exterior of the building. Following the fire, Oman Insurance Company (OIC), the insurer of The Torch Tower assessed the damages. The insurance contract is between OIC and the Torch Tower owners and not with the tenants. Management in charge of the building, the Kingfield Owner Association Management Services, arranged for temporary shelter and provisions for residents in the adjacent Princess Tower. Out of the 10 Construction Business News ME March 2015

676 apartments units, 101 are still not accessible and the affected owners and tenants can avail the alternate accommodation provided. Dubai Civil Defense has deemed that all apartments not directly affected by the fire are habitable. Tim Crowe, Kingfield Owner Association Manager said, “Kingfield appreciates the immediate action taken by Oman Insurance to appoint a loss adjuster who was on site within a couple of hours and also to approve our requests for compensation for emergency accommodation for our residents. We have confidence that Oman Insurance will continue to assist us with reasonable settlement of valid claims under the terms of the insurance policy.”

The Loss Adjuster and OIC have already begun with the inspection of affected apartments. Most of the damages were concentrated in the balcony areas and the structure of the building has not been majorly affected. The damage was limited to the exterior cladding, and that fire damage is far less than expected initially. The building consists of 2 low zone and 2 high zone lifts which are now manually operated, while Kone is on site to bring all lifts back under normal operation. Meetings are ongoing with Dubai Police, Dubai Municipality, Dubai Civil Defense, RTA and Dubai Tram to discuss the removal of loose debris on the building façade affected by the fire.


It is, without doubt, one of the harshest environments on earth: the Empty Quarter in the Kingdom of Saudi Arabia – the largest and most barren sand desert in the world, spreading itself over four Arab nations and covering 650,000 km2 which is comparable in size to France. Temperatures range from 50° to -1°C in the course of a single day and the sand and dust are relentless. The nearest city is 1000 kilometres away. So the construction of a 256 kilometre road cutting through this wildnerness, linking Saudi Arabia to the Sultanate of Oman, called for an extraordinary solution. The response: a eet of 95 Volvo machines was assembled. Together, they shifted over 130 million m3 of sand just to build the bridge of the road – an extraordinary feat in such harsh conditions, yet the quality and power of Volvo engineering was up to the challenge. The difculties created by the remote isolation of the worksite were answered with excellent customer support from FAMCO, the authorised Volvo dealer in Saudi Arabia, which included the organisation of mobile 247/ service workshops that moved forward with the construction operation. Discover a new way.

Main Office: Jeddah: Old Makkah Road Kilo 6, Tel: +966 12 680 4444 Riyadh: Khurais Road Exit 30, Tel: +966 11 233 3555 Dammam: Dammam-Khobar Highway, Tel: +966 13 859 8484 Abha: Khamis Mushayt - King Fahad Road, Tel: +966 17 227 4066 Makkah: Al Haaj Road, Tel: +966 12 542 8484 e-mail: famco@alfuttaim.sa www.al-futtaim.ae

www.famcosaudi.com Construction Business News ME March 2015 11


NEWS MIDDLE EAST

CARDIAC CENTRE WORK TO BEGIN IN 6 WEEKS BAHRAIN - Abu Dhabi Fund for Development (ADFD) has announced that the construction of the AED550.95 million Cardiac Centre will commence within six weeks in the Awali area of Bahrain. The project has been financed by a grant offered by the UAE to Bahrain in 2013 as part of the GCC development programme. Managed by ADFD on behalf of the UAE Government, the new facility will meet the growing demand for specialised cardiology services in the Kingdom of Bahrain. Taking shape across an area of 44,000 square metres, the new facility will include an outpatient clinic, radiology department, scanning, pharmacy, physiotherapy, and sterilisation, emergency and operation theaters, as welI as an ICU, laboratory and dedicated wards for men, women and children. The centre will feature 150 beds, boosting the capacity of the existing 65-bed cardiac unit.

Damac sets a new standard in real estate RIYADH - Luxury real estate developer Damac Properties has announced that its Damac Esclusiva and Damac Tower by Paramount projects on King Fahd Road have now reached their final heights at 32 and 35 floors respectively. Blockwork on each tower has also reached the top floors. The buildings will be first of its kind in the Kingdom offering the ultimate luxury living experience, with the 100 private servicedapartments in Damac Esclusiva designed with interiors by Fendi Casa. The unique features of the design will be the mix between the ancient Eastern heritage and the beauty of Italian craftsmanship. The collaboration between Damac Properties and Fendi includes Damac Residenze, another landmark project in Dubai overlooking a waterfront. Damac Esclusiva and Damac Tower by Paramount are set to be finished next.

DAMAC TOWER BY PARAMOUNT, RIYADH

12 Construction Business News ME March 2015


Project Qatar receives robust support DOHA - Project Qatar 2015, the 12th edition of the show, has received an unparalleled level of contributions from a wide range of sponsors and numerous supporting bodies, comprising of private and public sector entities alike. The event is scheduled to unfold from May 4 – 7 at the Qatar National Convention Centre. This year, notable sponsors include Al Sraiya Group, Qatar Primary Materials Company (QPMC), Emirates Steel, Tadmur Holding, Hensel Phelps, QDSBG Construction and Bitumode Qatar. Serving as the sole integrity sponsor of Project Qatar 2015, Al Sraiya Group has been providing integrated and diversified services to Qatar’s construction industry since 1975.

Shapoorji Pallonji wins contract for Kuwait University

Al Habtoor plans to expand to Egypt CAIRO- Khalaf Ahmad Al Habtoor, Chairman of the Al Habtoor Group is heading to Egypt in the coming days to study potential business opportunities in the country. Al Habtoor said he is conducting feasibility studies in the automotive, real estate and hospitality sectors. Al Habtoor said, “It is my

hope to build Al Habtoor City in a prime location such as Cairo. This will be of great benefit to the country’s economy, and will also provide thousands of jobs.” He added, “Thousands of families in Egypt would benefit from a project like this, as most of the jobs would be recruited locally.”

KUWAIT CITY - Shapoorji Pallonji, have won the contract to build, operate and maintain the colleges at Kuwait University. The space would include college of social science, law and Shariaa & Islamic studies, as well as the prayer areas and a faculty club. They recently announced that the contract between the university and contractors was officially signed in January earlier this year. The project is valued at approximately US$ 525 mil-

lion with a contract period of 42 months. Shapoorji Pallonji is has a growing presence in the Kuwaiti market. It recently also won the design-build contract with supply, installation and maintenance of medical procurement for the Al Sabah Hospital. The project is a $635 million assignment installing a building for 617 beds. It is currently in its design phase and is expected to be completed in 48 months.

Construction Business News ME March 2015 13


NEWS WORLD

AK STEEL TO BUILD NEW RESEARCH CENTRE West Chester, USA: On February 23 AK Steel, producers of flat-rolled carbon, stainless and electrical steel products announced that it will build a new world-class Research and Innovation Center in Middletown, Ohio. The 120,000 square foot facility will be constructed on a 15-acre site located in the Cincinnati – Dayton. The estimated project cost is US$36 million. The new Research and Innovation Center will replace the company's existing research facility that is located at another site in Middletown

TP INTRODUCES NEW STONE WALLS Long Island, USA - Texture Plus, manufacturer of high-impact textured faux wall panels, introduces a new exclusive Stacked Stone Dry Stack Select Collection. The wall panels have an easy-to-install interlock design. Texture Plus wall panels are widely used in thousands of successful installations for commercial, homeowner, retail, theme parks, hospitality, tradeshow design and other industries in a wide range of climates. 14 Construction Business News ME March 2015

Substantial growth recorded in industrial construction London, UK- Figures released on February 20 revealed that the industrial construction sector in January increased its total value of contracts by over 38% compared to December, with a number of major projects announced across the month. The data shows industrial construction in January 2015 rose above the £500 million barrier compared to £362 million recorded in the January 2014. This is an encouraging sign for a sector that has already performed relatively well over the last 12 months having had a 26% increase for year on year growth in 2014. Michael Dall, lead economist at Barbour ABI, said, "In the three months to January the total value of contracts for industrial construction was £1.2 billion, almost 18% higher than the previous three months. He added, "The total value of industrial projects reaching the advanced planning stage in 2014 was £6.4 billion, an increase of over 50% on 2013, indicating a bright future for the sector."


Construction Business News ME March 2015 15


IN PERSON

STAYING

AHEAD 16 Construction Business News ME March 2015


Drake and Scull Engineering (DSE), recognised as an expert in the MEP industry, has constantly evolved and managed to stay ahead of its fierce competitors. This month, Ahmad Al Naser, Managing Director of DSE, speaks with Lorraine Bangera about the pressures of working in the construction industry and what it takes to stay on top

A

hmad Al Naser is surprised at how quickly time has flown by as it has been 13 years since he first joined Drake and Scull International (DSI). “Every day has been interesting and had its own challenges and achievements. But it has been a very fulfilling and rewarding experience, and I value the friendships and relationships I’ve cultivated here,” Naser says as he cherishes the many memories he has with the company. Naser was fresh out of university before the he delved into the tough world of construction. He graduated with a degree in Mechanical Engineering from the University of Jordan and is now a member of the American Society of Heating, Refrigeration & Air conditioning Engineers (ASHRAE) and the Jordon Engineering Association. He started his career as a project manager at DSI, which soon transitioned into the area general manager of Abu Dhabi. In the years to follow Naser led DSE’s expansion into new markets like KSA and India as the regional director, before being promoted to the MD in 2014. Currently he manages all DSE projects across the MENA, South Asia and Europe, which helps him develop strong working relationships with existing and potential business partners. Some of his priorities include ensuring the growth of the business, maintaining the quality of work and reputation while meeting targets and increasing the share value for their shareholders. When asked about his secret to success, he honestly replies, “There is no substitute for dedication and hard work. It is important to take pride in what you do and to be driven by passion to be the best in your field.” There have been innumerable challenges in his journey,

Construction Business News ME March 2015 17


IN PERSON

CAYAN (INFINITY) TOWER, DUBAI

the biggest being his scope of responsibility which he takes up quite seriously. Apart from managing all the DSE markets in the region, he also maintains over 15,000 employees who need constant motivation to excel. CHALLENGES The industry is vast, complex and rapidly evolving and according to Naser, “competition is improving each day.” To be the top player he says, “We have to be on our toes and ensure that we remain well ahead of our competitors and continue to be the preferred engineering partner for our clients.” From a contracting perspective, Naser observes that one of the main challenges is the competitive pricing for job tenders as the market is currently very demanding. He says, “The only way for us to meet our targets is to improve our productivity and apply innovative solutions which would give us an edge over our competitors.” DSI however, has a great advantage as they offer clients a one stop shop for complete project execution and delivery, from the pre-design stage to postdelivery operations and maintenance. DSI businesses include Drake & Scull Engineering, Drake & Scull Construction, Drake & Scull Oil and Gas, Drake & Scull Rail, Passavant Energy & Environment and Drake & Scull Development. All sister companies who operate 18 Construction Business News ME March 2015

independently, yet have the flexibility to integrate their services, depending on the needs of the projects. According to Naser, the fact that they are sister companies, helps them operate and work in sync, avoiding the hassles that are usually faced when multiple teams from different companies work on projects. He says, “Our wide footprint also gives us the ability to shift our resources (material, human and financial) and scale our presence, to suit the requirements of a particular project.” DSE is also familiar with the regions local conditions, regulations and cultural sensitivities which in Naser's opinion allows them to deliver high cost efficiency on projects. Another key factor to success Naser says is “transparency and trust”. DSE have certified management models such as ISO 9001:2008, ISO 14001:2005 and OHSAS 18001:2007. The company is professionally run and is publicly listed, which means its practices are transparent and rank high on corporate governance practices. MIDDLE EAST The Middle East has been rising in the last decade and the UAE, KSA and Qatar will continue to be at the forefront of the real estate development sector. The MD is particularly thrilled about the projects in Qatar and UAE coming up in the next few years.

HABTOOR CITY, DUBAI


He says, “It is no secret that the industry underwent a very tough time in the last few years and has just recently started to recover from a lukewarm environment. “The World Cup 2022 win for Qatar and the 2020 Expo win for Dubai was a shot in the arm for the construction industry that has reinvigorated the regional real estate market.” Qatar has an ambitious vision, and draws a comprehensive plan to implement this vision. He says, “We feel the city has a fairly good chance of rivaling Dubai’s famed skyline over the next decade. “With one of the world’s biggest sovereign funds acting as a buffer, Qatar is not expected to witness any slowdown on the booming infrastructure development oriented toward the 2022 World Cup preparations.” Qatar is also expected to move ahead on crucial long term investments like the Doha Metro and the GCC rail which deliver a substantial boost to the Qatari economy. Naser also notes gradual signs of big project announcements and infrastructure development that was put on the backburner in the last few years. He carefully admits, “The recent oil price dip has given us enough reason to be cautious in our outlook, though regional governments have largely committed to continue their investment in core infrastructure.” For example, Qatar, despite its perception as an “oil price sensitive market,” has made significant progress in developing the non-oil sector. He points out that according to a Kamco Research titled ‘GCC Economic Outlook 2015’, Qatar is expected to spend around US$140 billion in the next five years, for the World Cup. “Of course, inflation and the vagaries of the oil price fluctuations pose as the biggest threat to Qatar’s development programmes.” But he adds according to the report titled ‘International Construction Cost Report 2014’ published by Arcadis, Qatar’s construction costs are on par with developed markets like USA and Italy. Naser says that the government

FACTS AND FIGURES: 130 years of experience Delivery of more than 700 projects in the last 5 decades, across MENA, Europe and Asia. DSI's current backlog: AED 14.4 BILLION

FACTS AND FIGURES: Some of DSI’s major ongoing projects include: KSA: Jabal Omar development in Mecca and King Fahad Medical City QATAR: The Mall of Qatar and Dohaland UAE: Louvre Museum and Habtoor City (Below)

KUWAIT: College of Arts and business OMAN: the New Muscat Airport

and the industry will have to figure out ways to restrict the rising costs to manageable levels. It would be a challenge to lay the groundwork and expand to accommodate the upcoming boom in the industry, specifically as the preparations for the Expo and the World Cup get underway. Naser says there will be a lot more competition as more firms move to the region to reap the benefits of the rapid growth in projects, which will also put pressure on the overall costs, as well as demand for human capital. In addition to Qatar and the UAE, Naser says that markets like Kuwait, Jordan, Oman, Egypt and Algeria will continue to also remain relevant and important for DSE, as they diligently ensure to retain their capacity to deliver large scale in these markets. LOOKING AHEAD After a successful 2014, DSI stepped into this year on a positive note with DSE’s recent AED 198 million MEP win for a prestigious hotel development in Dubai as well as the AED 180 million Reef Real Estate contracting project for sister company Drake & Scull Construction in Dubai. Delighted about his sister company’s achievement, Naser says, “We are confident the Reef Residence Tower project will become a prominent landmark of the emirate’s skyline.” “Our backlog is at an all-time high and we have a decent portfolio of ongoing projects and our workforce is rapidly expanding. So I remain optimistic about our prospects for the near future,” says Naser. He adds that even though the complexity of dealing with multiple markets presents interesting and unique challenges, their overall aim remains the same. He says, “We have to continue to expand our backlog and to ensure reasonable profits on our projects. This will be very crucial for DSE to continue positioning itself as the Prime Contractor in the region by delivering projects on time within budgets and to DSE quality standards.”

Construction Business News ME March 2015 19


COVER STORY

Over a Barrel

A sharp decline in the oil price has given the construction industry pause for thought about the future. Orlando Crowcroft writes 20 Construction Business News ME March 2015


Low margins and competition have been a challenge in the Gulf for as long as international contractors have flocked to its petro-states to cash in on a decades-long development boom. But the oil crash that hit global markets last summer and now sees crude worth just half of its value in June 2014 has industry experts talking of a slow-down in development pipeline that could possibly see life made even harder for construction firms in the GCC. “I’m not seeing this yet and it’s too early to form a better view (but), if prolonged, contractors with gaps in their order books could increase tender competition and lower margins,” said Andrew Jeffery, Director of Infrastructure and Capital Projects at Deloitte. What is clear is that decreased oil revenues will hit some GCC states harder than others. Saudi Arabia may be the world’s largest oil producer but it also has massive foreign currency reserves, worth some US$740 billion or 98% of GDP. New king Salman bin Abdul-Aziz’s recent $30 billion splurge on payouts for state workers demonstrates that Saudi rulers are willing to dip into this rainy day fund to make up any slack from falling oil revenues – it is not a stretch to suppose those reserves will also be available for essential infrastructure projects. Equally Saudi Arabia has nowhere near the development pipeline, comparatively, that Dubai and Abu Dhabi currently have as the UAE ramps up for the Expo 2020 Dubai and caters for increasing tourism numbers. For the latter, far more reliant on oil prices than its diversified neighbour, things could be far more difficult. “We expect public expenditure, particularly on projects, to decline in line with falling oil prices. But while this means the outlook for construction in Abu Dhabi

“We think it is unlikely that construction activity will be influenced by the oil price in Qatar in the short term.” Nick Smith

is potentially weak, the same may not necessarily be true of Dubai,” said Farouk Soussa, Chief Economist for the Middle East at Citi. He pointed out that funding for public projects in Dubai is not reliant on oil revenues, but on the performance of the wider economy, so the outlook for both public and private construction will depend on Dubai’s economic performance this year. In January, the IMF revised that down to 4.5% – but was positive about growth in the emirate’s non-oil sector. “To be sure, there are challenges, with weaker regional growth likely to create headwinds for Dubai’s economy. But the global economic and trade backdrop remains broadly supportive of Dubai’s core industries, trade, logistics and tourism,” he said, adding that the potential deal with Iran and the international commu-

nity presented a huge opportunity for the emirate’s economy. And economists point out that as a single country, the UAE is in pretty good shape. It has substantial reserves of its own and multiple industries outside of oil and gas that much of the new development scheduled for 2015 is targeting. Tourism numbers certainly took a hit during the last quarter of 2014, but this was mainly due to a drop off in visitors to Russia rather than Dubai-specific issues. “The key point we’ve made is that the UAE should be able to withstand a period of lower oil prices relatively well. Its economy is by far the most diversified in the Gulf and the government’s large savings mean that it is well placed to sustain spending,” said Jason Tuvey, Middle East Economist at Capital Economics in London. Indeed, if there is a drop off in development and a subsequent impact on the construction industry, it may not necessarily be a bad thing. A trimming of the fat ahead of what is undoubtedly a new boom in Dubai may help to assuage the fears of those looking at huge growth at the beginning of last year and talking of a bubble. Over in Qatar there are also fears amongst contractors that the effect of the oil price drop will impact their bottom lines in the year ahead, even if so far there has been little hard evidence that this will come to pass. Nick Smith, Partner and Construction Consultant at EC Harris, said this was particularly true for those on statefunded work. “Currently we are witnessing increased levels of concern from some clients particularly within the public sector where funding is tuned to oil and gas revenues,” Smith said. “We think it is unlikely that construction

Construction Business News ME March 2015 21


COVER STORY

“Contractors with gaps in their order books could increase tender competition and lower margins.” Andrew Jeffery activity will be influenced by the oil price in Qatar in the short term, however, if this trend continues viability of projects may be reviewed which could have an impact on construction activity.” In terms of direct impact, Smith said 22 Construction Business News ME March 2015

that the drop in oil prices had lowered transportation costs for contractors substantially, but this was obviously being felt across the whole economy. And he said that while it was early days, there was potential that there could be an adverse affect on contractors long term. “If the oil price reduction leads to the cancellation or suspension of pipeline projects … then this could lead to increased competition – because of less projects for contractors to bid for – and pressure on margins,” he said. At the same time, preparations for the World Cup 2020 will give contractors involved in those projects some respite. With its immovable and approaching deadline, Qatar has little choice of whether or not to build stadiums, infrastructure and hotels. But experts feel that, as in Dubai and Abu Dhabi, a forced re-think of some areas of the development market may not be a bad thing. If projects are falling by the wayside because of the oil price slide, they were probably not good propositions anyway. Deloitte’s Jeffery said that across the GCC only the more speculative development end of the market would be dampened as values soften. For more critical infrastructure and government-funded development including health and education, it is likely projects will be prioritised to

reflect the pressure on budgets. “This is a smart move and should ensure only the best projects continue to receive funding - a good indicator of a maturing market in some of the Middle East countries,” he said.

“The key point we’ve made is that the UAE should be able to withstand a period of lower oil prices relatively well.” Jason Tuvey


Construction Business News ME March 2015 23


24 Construction Business News ME March 2015


Construction Business News ME March 2015 25


ANALYSIS

BUILD

PIPEL Is there enough demand to keep the contract awards coming? Stuart Matthews writes

26 Construction Business News ME March 2015


D THE

LINE I

t’s the end of February and developers are packing their bags and heading to the UK. It’s not a great market exodus, but a chance to build what one off-handedly describes as ‘a development pipeline’. Some 36 of the UAE’s developers are off to London for the Dubai Property Show and after three days of wheeling and dealing, hope to come back with a fist full of dollars invested in their planned and proceeding projects. A few years ago, such wishes would have been a pipe dream, but thanks to improved market liquidity and a renewed desire to build projects people might actually want, there’s more than

a whiff of hope pervading airports’ business-class lounges. Like any business, developers need demand to keep growing. Importing some from the UK, Europe, India or Africa may be the answer needed to sustain an active development market beyond what local sales can support. “The development market in the UAE is currently the most active it has been since before the financial crises in 2007/2008, with many of the projects delayed since that time now moving belatedly ahead,” says Craig Plumb, head of research MENA for JLL, a professional services company. “The market is most active in Dubai, Construction Business News ME March 2015 27


ANALYSIS

WORK CONTINUES IN THE DOWNTOWN AREA OF DUBAI

where we estimate around 25,000 additional residential units will complete in 2015, along with 1.2m2 of office space, 267,000 m2 of retail malls and a further 4,700 hotel rooms.” There’s a clear slant in interest toward residential projects, or those aimed at the hospitality and entertainment sectors. Investor confidence remains says Plumb, who notes that projects are being launched on a regular, almost weekly, basis. At the same time the list of stalled and cancelled projects, many a legacy of the financial crisis, are gradually being tidied away. Dubai Courts lists eleven projects being liquidated, for which claimants have until the end of March 2015 to file an interest. The result is a more positive outlook than for many years previously, based, for the most part, on sensible projects combined with steady development timetables. “Not all of the projects that have been announced will proceed to the construction stage over the next two years, as there is probably not sufficient investment appetite to fund all these proposed developments” says Plumb. 28 Construction Business News ME March 2015

“Many of those that do proceed Some believe the result is a move toare likely to do so on a staged basis. ward greater quality, as Janus Rostock, We expect relatively few new master design director, architecture and urban planned projects to be announced, design for Atkins explains. with most of the construction activity “There’s been a fairly healthy levelling being further stages of existing out in Dubai’s property market master-planned projects.” during the last couple of Plumb predicts a months and it feels ‘marginal softening’ like it’s at a sensible ACCORDING TO VENTURES for the residential level,” he says. ME, CONSTRUCTION PROand hospitality “What that JECTS ACROSS ALL BUILDmarkets over the means is that ING SECTORS WORTH $67.6 next one to two people are asking BILLION WERE COMPLETED years, after the the right sorts of IN THE GCC IN 2014. SOME $85 slightly tumultuquestions about BILLION WORTH OF ous period of very whether projects PROJECTS WERE AWARDED strong price escalaare feasible or not, tion experienced in and it means devel2014. He, like many opers are being careful others, see the ensuing about how they phase period of stability - in terms of developments to meet market rents and prices - as a good thing for the needs. That’s positive because it means overall market and something that could that if there’s doubt about a project’s contribute positively to the competitivevalidity it is unlikely to proceed, and it ness of Dubai over the long term. supports a flight-to-quality development The impact of these shifts is being because anything that’s not at the right felt by those who turn developer’s standard will fail.” promises into an end-users reality. With the advent of Dubai Expo 2020


PROGRESS NEAR THE WORLDS TALLEST

CRAIG PLUMB

NIALL MCLOUGHLIN

JANUS ROSTOCK

ACCORDING TO VENTURES ME, $72 BILLION IN PROJECTS WILL BE COMPLETED IN THE GCC IN 2015, UP 6.5% ON 2014. A FURTHER $103 BILLION MAY BE AWARDED, UP 21.2%

the development market is expecting to see further opportunities emerge soon. Importantly, they will be opportunities with a very visible and fixed deadline. “Expo 2020 Dubai is a strategically important event with a critical deadline,” says Rostock. “We’d expect to see investment in three and four-star hospitality, for which there’s a growing need, and high quality mixed-use development, which enjoys strong links to the public transport network. “Transport-oriented development is going to play a key role as Dubai’s property market continues to mature and develop, because it supports the city’s aspirations to enable sustainable, healthy living and strong communities. We also expect to see a continued diversification of Dubai’s offering, in terms of cultural and entertainment related development which attracts visitors and generates income.” These kinds of opportunities are reflected in Atkins’ current project portfolio, with the firm working on large scale development projects with major developers, including Emaar and Al Habtoor. “[The projects] all reflect these principles, either by offering something new and different or by reaching new heights of quality,” says Rostock. “Dubai Opera is a clear example of a stunning project which will add to Dubai’s offering as part of a highly successful existing neighbourhood. Al Habtoor Residences will be exceptional quality in their own right, as well as being located directly next to the Dubai Canal, which will be a new destination for the city. “The level of planning which has gone into these projects is exceptional and will ensure they are very much a part of the places in which they sit, adding to their community and supporting sustainable growth.” Notably, these projects are well under way. The more stable market conditions, combined with - and in some cases caused by - a tightening of the regulatory environment, has helped to prompt the project launches that have been announced over the last 12 months and also got the building process started. “Over the next year the property Construction Business News ME March 2015 29


ANALYSIS

“It is imperative that the right products, at the right price, and – critically – in the right locations are presented. Buyers have a wide selection of property in Dubai and it is only those that offer the highest quality product and service that will do well.” Niall McLoughlin

market across the emirate will be going through a big ‘build’ phase,” says Niall McLoughlin, senior vice president, DAMAC Properties. “Recently many developers, including ourselves, launched large scale luxury developments which are taking three to five years to complete. As these developments work their way through the construction phase, you are going to see the first real completions and handover of units coming up in 2016.” McLoughlin’s view of the opportunities in the market chime with those of others when it comes to the impact of population growth and targets the UAE has set itself for tourism. He is also bullish about future demand. “Dubai has been one of the best performing real estate markets in the world over the past year,” he says. “Demand 30 Construction Business News ME March 2015

is set to continue outstripping supply our portfolio defines the timeline of and there remains a strong desire from deliveries and ensures consistent progress international investors to own a second throughout the construction pipeline.” home in the UAE. It is progress that both the industry “Having said that it is imperative and the ultimate end users want to see. that the right products, at the right Still wary of the crash, there is a much price, and – critically – in the right greater emphasis on delivery across the locations are presented. Buyers have market than in the early boom days. a wide selection of property in Dubai “There has been a shift away from and it is only those that offer the highoff plan sales over the past few years est quality product and service that with more developers seeking to fund will do well. Experience, delivery and projects through either borrowing or trust are key elements.” raising their own equity,” explains JLL’s McLoughlin says Damac Properties Craig Plumb. has carved a niche out of delivering Plumb sees funding as one of the two high-quality, luxury living experiences key challenges facing the construction in the best locations. It may sound industry over the next few years. like hyperbole, but the comWith the possible oversupply pany has caught plenty in certain market sectors of headlines with the being the second. launch of its Akoya “While the apby Damac and petite of the local ACCORDING TO VENTURES Akoya Oxygen banks for real ME, OF THE PROJECTS COMmaster developestate lending is PLETED ACROSS THE GCC ments and subon the rise again, IN 2014 RESIDENTIAL MADE sequent contract most are applying UP TO 41.5%, COMMERCIAL 16.97% AND EDUCATION 10.6% awards. So far this a healthy degree year awarded work of caution and are form the developer being selective in has reached a value of terms of which proj$326m across five major ects they will finance,” he construction contracts, awardsays. “It is also probable that ed to a variety of contractors, including the cost of bank debt will increase as Ghantoot and Seidco. interest rates begin to rise over the next “Akoya by Damac will hit a number 18 months.” of key milestones in the coming year,” Some developers have found the says McLoughlin. “The first residents solution in equity raising in the UAE will move into their luxury villas and market - Plumb points to Emaar Malls as the Trump international Golf Club, a prime example - but this too is fraught Dubai will be completed. This is a really with issues, exciting time for Damac Properties and “The ability of developers to raise our owners as we welcome the first resi- money from IPO’s or other capital raisdents to our first master development.” ings has however been constrained by The company is also progressing recent falls in equity markets and many with its tower project in the Burj Area of the proposed offerings are currently of Dubai, Damac Towers by Paraon hold until [financial] market condimount, which the company says will tions improve.” be completed next year. McLoughlin Regardless of the challenges though, says contractors can look forward to developers in the UAE will continue to further awards. seek ways to push ahead with projects “The majority of our tenders will be designed to attract people and provide around the construction of Akoya by a profit. Contractors and consumers Damac, and Akoya Oxygen,” he says. alike will be hoping they can build on “The awarding of further contracts across recent successes.


seabury report

THE NEW GATEWAY TO THE GULF

Construction Business News ME March 2015 31


ARCHITECTURE

AN ARCHITECT’S PREROGATIVE

Today, with the help of technology an architect can turn any vivid design into a reality. Dr Varkki George Pallathucheril, Interim Dean of the College of Architecture in American University of Sharjah (AUS), speaks with Lorraine Bangera about if this period is the best time to be an architect

H

ow has advances in technology affected architecture in the last decade? It is true that advances in building systems, materials and construction methods have taken away many of the constraints that used to be placed on designing and constructing a structure in a particular place and time. In my view, however, this has not necessarily liberated the designer as much as we might think. Rather, it has made the designer all the more responsible for being smart and recognizing the necessary limits on design decisions. Just because we can do something does not mean 32 Construction Business News ME March 2015

“The region is at the present time very much on the radar of global practices.�

that we should. There are unexpected and unintended consequences, which a casual design decision may not consider, that designers must not take casually. Could you tell us about some major setbacks an architect working in the Middle East would face today? It may be true of designing in other contexts as well, but I believe there are barriers to achieving quality design in our context. On the one hand, some projects have high profiles and large budgets that demand product differentiation. They end up being different for the sake of being different, which need not be a good thing. On the other hand,

a vast majority of projects have such tight budgets and timelines that it is difficult for the designer to deviate from the norm. We get a regression to the typical that again may not be a good thing. Do you find some urban spaces today soulless compared to historic structures that were more in touch with nature? I don't believe a missing link to nature or the environment is necessarily the only issue. When AUS alumna Shaima al Harmoudi and I took a preliminary look at how places have evolved over the past five decades, we found that the issue was about social and cultural


“To me, sustainability is more than a moral imperative. It may be as much an existential imperative.” HEART OF SHARJAH HEART OF SHARJAH

BIRD VIEW OF THE HEART OF SHARJAH

changes. The increased extent to which automobiles are privileged in our urban places plays a role, as does the incredibly high rate of social and cultural change the region is experiencing. How important is sustainable architecture today? To me, sustainability is more than a moral imperative. It may be as much an existential imperative. We may be looking at long-term and dramatic changes to the natural systems that support our existence. These changes would in turn force unwelcome changes to our way of life and our children's way of life. Why not make changes to our built, social, and economic systems, ones that we can live with, and hopefully deflect the dramatic changes that are coming our

way? At AUS, we do teach sustainability to our students and the institution aims to be sustainable in its practices as well. We can always do more and are looking at courses and practices that move us in that direction. Is incorporating environmentalism and design together an architect’s biggest challenge? I think the challenge is more multidimensional. We most certainly have to reduce our impact on the environment but we are dealing with complex systems that also have social, cultural, political and economic components. The designer of a particular structure or building may not initiate a systemwide change but the aggregate of such individual actions can have systemic

impacts. What do you think about the current construction industry in the Middle East? The region is at the present time very much on the radar of global practices. The question is whether there is a critical mass centered in the region. I think that is a longer-term outcome. The professionals that we graduate at AUS will contribute to that outcome. Do you have a favourite building in the region? The building that I think is notable, my former colleague, Mona al Mousfy, designed exhibition spaces in the Heart of Sharjah project. I am struck by how she successfully and elegantly navigated some of the aforementioned challenges. Construction Business News ME March 2015 33


SUSTAINABILITY

SUSTAINABLE

SURGE

The UAE government have taken innumerable measures in the last five years towards making the country more sustainable. Lorraine Bangera analyses the role of the construction industry in this transition towards a smarter and greener state

34 Construction Business News ME March 2015


T

wo cities in the UAE ranked top in the region by Arcadis’ inaugural Sustainable Cities Index. The index, conducted by the Center for Economics and Business Research (Cebr) in UK, ranked 50 leading cities in the world. Dubai tops the ranking in the Middle East with the 33rd place, immediately followed by Abu Dhabi. Today, Dubai is moving towards the smart city concept, which was emphasised in this year’s Government Summit 2015 held in early February. HE Saeed Mohammed Al Tayer, MD and CEO of Dubai Electricity and Water Authority (DEWA) addressed the summit with specific pointers on how to evolve organically towards sustainability and smart living. Discussing his plans for developing Dubai as the city of the future, he says, “We intend to make Dubai the smartest city in the world within 3 years. The city of the future is smart, integrated, connected and uses its resources sustainably. He explains that one of the key elements of smart cities is the close cooperation of all stakeholders, including urban developers, water, electricity, communications, transportation, educational, and healthcare service providers, and other government and private organisations. He says, "We shouldn’t focus solely on the infrastructure as the main element in the urban planning process.” Professor Kent L. Larson, Director of City Science at Massachusetts Institute of Technology (MIT), says that cities of the future will be compact, diverse and walkable communities much like the compact neighbourhood concepts of the medieval period. The professor, an expert on new urban housing and vehicles, spoke at the Government Summit as well and emphasised that the past holds the secret to the future, and urged governments to design cities for people, and not for machines. Larson identified density, proximity and diversity as three key factors to create an innovative society that enjoys a good quality of life. He says that new urban spaces based on this concept will pave the way for innova-

tion and create cities that are smart, green and sustainable. Construction industry: A key player Construction plays a major role in the transition towards smart cities and sustainable living. According to Shivram Mukherjee, Consultant at First Climate, “Sustainable construction is the efficient use of raw materials, such as using ecofriendly materials for construction.” He elaborates saying that using ecofriendly raw materials directly reduces the waste of raw materials which eventually drops carbon footprint. This he says has a “direct impact in overall sustainability of the country.” The construction industry is not just restricted to using sustainable raw materials, but could contribute in various ways such as incorporating green measures in design, construction or operations of a building. Amol Kotwal, Director of Energy & Environment Practice at Frost & Sullivan, says, “Contribution to sustainability could start from urban planning and include initiatives and efforts such as water treatment, environment and waste management, thermal insulation, energy conservation.” In the UAE, he says, an efficient air-condition system, the use of LED lighting, and the use of solar water heating systems are some areas that construction companies are working on for developing sustainable buildings. Government initiatives The UAE government have taken numerous measures to join the green movement. Stephen Smith, Sustainability Manager at Brookfield Multiplex Middle East, says, “Government initiatives such as Dubai Plan 2021 and Abu Dhabi Vision 2030 are founded on themes which address key issues surrounding sustainability, particularly sustainable development of the built environment, the establishment of regulations aligned with international best practices and the promotion of sustainable consumption of natural resources.” According to Kotwal, “the Green Building Standards in Dubai and Estidama’s Pearl Rating System (PRS) in Abu Dhabi have made an effective

TOP 10 SUSTAINABLE CITIES INDEX: Frankfurt GERMANY London UNITED KINGDOM Copenhagen DENMARK Amsterdam NETHERLANDS Rotterdam NETHERLANDS Berlin GERMANY Seoul SOUTH KOREA Hong Kong PEOPLE'S REPUBLIC OF CHINA Madrid SPAIN

Singapore

UAE'S SUSTAINABLE INITIATIVES • UAE Green Economy Initiative • UAE Vision 2021 • Dubai Integrated Energy Strategy 2030 • Dubai Plan 2021 • Abu Dhabi Vision 2030

Construction Business News ME March 2015 35


SUSTAINABILITY

change in UAE’s construction industry.” Smith agrees with Kotwal about the positive impact of the regulations. He says, “Such legislative mandates are rapidly changing the shape of the built environment throughout the UAE.” He explicates that these rating systems and regulations are not only improving the standards of sustainable design and construction practices throughout the industry; they are also acting as a platform for the delivery of higher-quality real estate assets for developers and end-users. The regulations, according to Smith, raises the “profile of sustainability” in the construction industry and successfully “grabs the attention” of developers, designers, contractors and facility managers. In contrast Ulysses Papadopoulos, Founder & Managing Partner at Green Emirates Consultants, thinks there is still a long way to go for the UAE government. He says, “I think they haven’t reached as far as the government was hoping they would when they set the standards up." He thinks it is more important for the private sector to take an action towards sustainability. He says, “The private sector in the UAE should not be waiting for the government to launch green building standards.” He adds, “If they take sustainability seriously, they could make remarkable changes themselves. “In fact some of the green building councils in the region have actually created their own standard called the Net 0 buildings.” Cost effectiveness Simple steps taken by the construction industry could leave a huge impact in sustainability, but most companies working in the sector often assume going ‘green’ would be costly. “’Switching to green is expensive’ is a myth,”Papadopoulos says. “Most construction companies are used to a safe method. “They need to be educated about sustainability. Using certified green products is not more expensive or complicated to explore. Most people also think green suppliers are hard to find, but if you look at our directory there are over a 100 suppliers.” “Awareness is key,” he says. 36 Construction Business News ME March 2015


HIGHLIGHTS OF ENERGY EFFICIENCY MEASURES IN THE UAE: • Masdar City demonstrates ecofriendly building practices by utilising clean energy • Al-Fahidi souq, an eco-friendly marketplace built using green building materials • Approximately 500 million square feet of new building area to be constructed for Dubai Expo 2020 •Use of solar energy for water heating at various hotels and residential properties

Smith says that even though the initial upfront design and construction costs for green buildings are typically more than a standard building, when you take into consideration the operational costs across the lifecycle of a building asset, tangible benefits are often quickly realised. A number of diverse factors such as a building’s location, materials, design, size, function, technologies and operational practices often influence the overall building’s costs and performance. He says, “It is therefore imperative that when developers are conducting feasibility assessments, they take into consideration the benefits of green building across its entire lifecycle.” With the lack of awareness and the myth of unreasonable expenses, the industry seemed to be blanketed with ignorance. Ivano Iannelli, CEO of Dubai Carbon, says he understands where the ignorance comes from. He says, “Most often we tend to do what is easy as opposed to what is efficient. We are humans, applying change is difficult when we are comfort." Sustainability is not convenient; he says it is “the challenge of achieving more by doing less.” Construction Business News ME March 2015 37


IN THE FIELD

BACK IN ACTION

Azizi Developments believes in creating affordable quality real estate. The business has a vast portfolio that is constantly driven to grow with minimum possibility of running into financial risks. This month, CBNME looks in to the company’s property development in an up and coming area of Al Furjan 38 Construction Business News ME March 2015


W

hat gives us a competitive edge is the affordable pricing, yet elegant lifestyle,” says Mohsen Kamel, CEO of Azizi Developments. “We specialise in luxurious apartments designed to meet customer needs, and which attract investors from all around the world.” He says that the demand for luxury homes is growing significantly as Dubai has become a city where most investors and high-profile individuals visit and work. Azizi has consciously focussed on creating modern projects to match market expectations. He adds, “Most of the clients, especially Europeans, are keen on buying properties that contain exclusive features. Our tailor-made projects are the right fit for them as they provide a sophisticated lifestyle experience.” The company’s latest investment in Al Furjan has been an estimated AED 4.5 billion driven by robust local demand for affordable luxury and value homes. The company launched five largescale residential projects in 2014 – including the sold-out Azizi Iris. As for the rest namely Azizi Liatris, the Azizi Orchid, the Azizi Yasamine and the Azizi Feirouz, have been sold out by 70%. Construction works for all five properties commenced in May last year. According to the CEO, Azizi Developments focuses on projects that set them apart from others in terms of choosing the location of Al Furjan. He says, “The area was chosen mainly

due to its strategic location that at the same time offers affordable living to our clients.” The area is located next to some of the city’s main attractions. “For instance, Dubai Marina and JBR are only a few minutes’ drive away, while Ibn Battuta Mall and the Dubai Metro network are even closer,” says Kamel. He adds, “It’s a short distance from the World Expo 2020 site and the Al Maktoum Airport. Additionally for sport lovers, it’s an ideal location for golf and many other activities.” The area will soon be an integrated society accommodating schools, offices and residential buildings, says Kamel. “As the projects near completion, the location will steadily become a hub for business as well as a place that will allow people to live luxuriously” As for challenges faced during the development, Kamel says, “We didn’t face many challenges while building in Al Furjan, as we have had great support from the master developer, Nakheel, and all the other government agencies.” “The only part that was particularly challenging was the dewatering, as it took longer than anticipated.” Sustainability will be integrated in the

AZIZI IRIS PROJECT UPDATE • Waterproofing works for the ground water tank (Tank Capacity is 220 m3). • Steel fixing, shuttering and concrete pouring of foundation and walls of ground water tank. •Scaffolding and shuttering of first flab (Area of slab is about 3500 m2). • Steel fixing of first slab. AZIZI ORCHID PROJECT UPDATE • Waterproofing works for the ground water tank (Tank Capacity is 220 m3). • Steel fixing, shuttering and concrete pouring of foundation and walls of ground water tank. • Scaffolding and shuttering of first flab (Area of slab is about 3500 m2). •Steel fixing of first slab.

Construction Business News ME March 2015 39


IN THE FIELD

future as well. Kamel says, “We have applied the energy efficient aspect for these five buildings. This means that all activities relating to structural, thermal, mechanical and electrical parts do comply with these rules.” “All our projects are LEED certified, and we also try to go the extra mile as much as possible in order to implement further energy efficiency such as the usage of LED lights throughout our buildings and for instance high quality electrical cables that prevent them from heating up and causing hazards, providing long and sustainable future of our projects.” During the financial crises of 2008, Azizi Developments cancelled its previous projects in order to help clients that were facing financial difficulties failing to continue the payments of the already invested projects. The top management then decided to hold off sales and construction, meet all clients and fully refund their payments. Cancelling the previous projects proved to be the right strategy at the time, and the company’s efforts to refund clients only brought more trust. Kamel says, “This has worked in our and the clients' favour as we gained more trust and repeat clientele.” Dubai’s property sector has recovered and experienced steady growth since then due to more strategic management. During the last quarter of 2014, nearly all segments of the local property market witnessed subdued growth levels. 40 Construction Business News ME March 2015


AZIZI LIATRIS PROJECT UPDATE • Waterproofing works for the ground water tank (Tank Capacity is 250 m3). • Steel fixing, shuttering and concrete pouring of foundation and walls of ground water tank. • Scaffolding and shuttering of first flab (Area of slab is about 3800 m2). • Steel fixing of first slab. • Post-tensioning works of first slab. • Mechanical, electrical and plumbing works of fist slab. AZIZI YASAMINE PROJECT UPDATE • Steel Reinforcement and shuttering of first floor columns and shear walls. • Concrete pouring of first floor columns and shear walls. • Scaffolding and shuttering of second slab (Area of slab is about 3800 m2). • Steel fixing of first slab. • Post-tensioning works of first slab. • Mechanical, electrical and plumbing works of fist slab. • Scaffolding and shuttering of swimming pool body at second floor. • Steel fixing of swimming pool body at second floor. AZIZI FEIROUZ PROJECT UPDATE • Waterproofing works for the ground water tank (Tank Capacity is 220 m3). • Steel fixing, shuttering and concrete

pouring of foundation and walls of ground water tank. • Steel fixing, shuttering and concrete pouring of parking ramp (slab of ground water tank). • Scaffolding and shuttering of first slab (Area of slab is about 3500 m2). • Steel fixing of first slab. • Post-tensioning works of first slab. • Mechanical, electrical and plumbing works of fist slab. • Concrete pouring of first pour of first slab.

According to Jones Lang LaSalle1, the average prices and rentals in the residential sector appear to have stabilised over recent months, with some locations registering marginal declines. Azizi Developments has made progress in maintaining an upward trajectory. Kamel says, “We worked hard and strategically rescheduled our projects based on market demands to cover various customer needs. This allowed us to increase our sales to become one of the major competitive real estate developers in the UAE. Basically, we got the four main P’s right: product, price, place and promotion.” Kamel says,“2014 was a great year for our company as we experienced a substantial sales increase, key department expansions, and a strong marketing push." One of the significant growth drivers is the market’s robust appetite for upscale property projects as high net-worth individuals continuously view Dubai as a secure place for their investments. "Other key elements for our growth are the high standard of quality and craftsmanship that we adhere to as well as our strong business ethics that have fostered long-standing relationships with our clients.” He adds, “For 2015, we expect to sustain our growth momentum from 2014. Current and upcoming projects will help generate high sales and increase profit. We are expecting this year to be very successful after our return from recession." Construction Business News ME March 2015 41


PROJECT REVIEW

SUSTAINABLE

Manar Mall, one of Ras Al Khaimah’s oldest malls, situated in Al Hamra Village has announced to expand to double its size due to excessive demand. Lorraine Bangera analyses the growth of Al Hamra Village as an integrated community and the reason behind its excessive popularity

A

l Hamra Village in Ras Al Khaimah recently announced expansion plans for its oldest retail outlet, Manar Mall. The expansion will add many new international stores, an enlarged entertainment area, along with a complete overhaul of existing facilities. Barry Ebrahimy, Head of Commercial at Al Hamra Real Estate Development, says, “Manar Mall was the first international style shopping mall that opened in Ras Al Khaimah 15 years ago. It has become one the most popular malls in the Northern Emirates.” The mall already consists of major international chains, including Carrefour, Marks & Spencer, H&M, Paris Gallery, Novo Cinemas, and Funcity. The expansion will see major international fashion brands enter the market in Ras Al Khaimah. Popular restaurant brands that have expressed strong interest to take prime locations within the new extension. Ebrahimy says, “The mall is very popular and busy at the moment. There are many retailers who have been looking for space. Hence we have decided to expand the mall, adding another 20,000 square metre to the gross leasable space which will almost double the mall. It will expand from 30,000 to 58,000 sqaure metre. The existing area is about 30,000 square metre and about 300,000 square feet will be the gross leasable area.” He says, “We plan to expand the mall in a single level,

42 Construction Business News ME March 2015

DESIGN PLANS FOR UPCOMING EXPANSION


EXPANSION

FACTS & FIGURES Al Hamra Village covers 77 million square feet with 1.5 kilometres of pristine beach, over 1,000 villas and town houses, 2,500 residential apartments, and 5 hotels Manar Mall is scheduled to grow to 58,000 square metres by 2016 Al Hamra Village consists of 1,000 villas and nearly 2,500 apartments

which would be ideal. The expansion will be done towards the water overlooking the mangroves. There will soon be a lot of anchor restaurants that will have a splendid view of the water.” Ebrahimy emphasises how top retailers have formally expressed an interest in renting space. According to him, most retailers choose Ras Al Khaimah while considering expansion in the Northern Emirates. He adds, “Because of Manar Mall’s history, footfall and recent retail activities, retailers choose this space.” To deal with the increasing traffic towards the mall Ebrahimy says, they have included an added multiplex parking space to expansion plans. Cadiz International, experts in shopping mall design, have been the architects in the project. While Shankland Cox Ltd., who previously worked on Yas Island, Zayed University, and the Al Ain Convention Centre, are appointed as lead consultants. Sun Engineering & Contractors won the construction contract worth AED 230 million. The contractors have previously been appointed for the Signature Tower and Burjside Boulevard Tower in Downtown Dubai, as well as the Sahara Mall expansion in Sharjah. Ebrahimy says, “Based on our tendering process we chose Sun Engineering & Contractors. The criteria is based on qualification, good track record, and the ability to deliver the project as requested and within the given timelines. Sun Engineering met all those criteria and after careful consideration we selected them for completion of the project.” Ebrahimy says, “The actual work on ground is scheduled to start on March 16 this year, and the expected date will be completed on September 16, 2016.” Other notable assets of Al Hamra Real Estate Development include Al Hamra Mall and five luxury hotels, including the flagship Waldorf Astoria Ras Al Khaimah. Al Hamra Real Estate is also developer of Al Hamra Village, a gated Construction Business News ME March 2015 43


PROJECT REVIEW

BIRD VIEW OF AL HAMRA VILLAGE

waterfront community with 1,000 villas and nearly 2,500 apartments. Ebrahimy says, “We are already one of the luxurious properties in the region. Al Hamra Village is home to 3500 properties. It is a serene beachfront community with a majestic golf course.” Al Hamra Village is a luxurious community offering an oceanfront living approximately 45 minutes from Dubai. Al Hamra Village offers investors a unique opportunity to purchase freehold property in the emirate. Al Hamra Village have two upcoming projects in the pipeline, one is Bayti which is a collection of 162 villas which ranges from three bedroom to four bedroom houses. “Even though construction on the project just started in June 2014, majority of the project has been sold out,” says Ebrahimy. “Construction is going very well and we expect a handover by December 2015.” The other project that is upcoming is Falcon Island, a natural island located in the Hamra lagoon. It is centrally located in Al Hamra Village and is around two 44 Construction Business News ME March 2015

million square feet. The project is a US$272 million project with villas and mansions, which will range from AED 5 to 25 million. The island will be the first platinum LEED certified project in the region to have the most sustainable design and construction. Ebrahimy says, “The island will be powered by solar energy, and will include a hybrid district cooling plant which will provide majority of the cooling from solar. It will also include water desalination and sewage treatment plant.” He adds, “Falcon Island is an exclusive project in the UAE. It is going to be an ultra-luxurious residential area, with the smallest mansion of about 5 bedrooms starting from 5000 square feet. “The 150 villas on the island will be furnished by Fendi Casa and Bentley Home among others, some of the biggest names in home furnishing and Italian design.” In December last year, Al Hamra announced that two of its developments have been named in an exclusive list of winners for the International Property

AL HAMRA VILLAGE GOLF COURSE, RAS AL KHAIMAH


Awards that recognise excellence in the global property industry. It landed awards in the ‘Residential Development’ category after Al Hamra Village and Falcon Island were both selected as winners. Al Hamra General Manager Benoy Kurien says the fact that Falcon Island has won one of the biggest accolades in the industry so early on bears testament to its world-leading sustainability credentials. He says, “The homes will be smart too, able to monitor the usage of solar energy and allow residents to monitor consumption. The project will also have a solar bridge, providing 100% of solar needs and all water will be processed and used for irrigation.” One of the main attractions towards the island, the GM explains is the tranquil, low-key setting that is enjoyed by residents living in Ras al Khaimah. He says, “Our close proximity to business centres in Dubai and Abu Dhabi, and connections to Dubai International Airport were also part of the appeal.” “We have been completely astonished

by just how popular our properties proved among audiences. Interest was especially high in the 11 mansions on Falcon Island,” adds Kurien. Al Hamra Village has been doing well according to Ebrahimy. He says, “Last year was an excellent year for us, both in terms of residential, retail and hospitality. Sales is robust and demand is very strong.” He explains how Al Hamra is going to be an integrated community with an international school and an upcoming clinic in the surrounding area. He says, “Our aim is to provide everything and bring a community together.” When asked about further expansions in Al Hamra Ebrahimy responded, “We do things in a very sustainable manner and we won’t keep building beyond the market needs. “Of course we have decided to expand Al Hamra Mall which is another mall located in the Village about a year ago and now we are expanding Manar mall. But that is only because of the extensive demand for expansion.”

AL HAMRA VILLAGE, RAS AL KHAIMAH

Construction Business News ME March 2015 45


Q&A

HOSPITAL ENDEAVOURS Sultan Sobhi Batterjee, CEO of IHCC, sits down with Lorraine Bangera to give us a few insights into what it takes to run a specialised construction business SAUDI GERMAN HOSPITAL, DUBAI

IHCC is a turnkey solutions provider, taking projects from inception to completion starting with the concept design to construction and equipping. Their portfolio is based on healthcare, education and mixed use projects, which includes hospitals, medical towers, medical clinics, speciality centres, speciality hospitals, universities, colleges, and schools. IHCC is a buiding specialist, usually dealing with the latest trend of project management and hygienic safety. Sultan Sobhi Batterjee gives us an insight into what it is like to run his business. What makes IHCC unique? We really believe that our leadership in the industry comes from being a specialised business. We started off as 46 Construction Business News ME March 2015

the International Hospital Construction Company specialising in hospitals that grew into healthcare facilities which is a lot broader than just hospitals. Even though our experience majorly consists of healthcare, which we are very proud of, we decided to grow our speciality in the educational facilities as well and shortening our name to IHCC. Eventually healthcare and education have transformed into mixed-use products. This was logical as hospitals now were not just hospitals anymore, they have been attached to educational, retail and residential facilities as well. For example, Saudi German Hospital in Dubai, was initially a US$140 million project that consisted of a 300 bed general hospital. We then signed a contract

to further develop seven residential towers. And now we have just signed a contract with them for six more centres of excellence that consists of commercial space which will include a miniature mall, educational facility, an elderly home, specialty centre for orthopedic, trauma centre and a long stay hospital. So therefore you see the transformation of our speciality from hospitals, to healthcare, education and mixed use, which includes residential and retail. How has being a specialised business been an advantage? We still stick to our speciality which is healthcare because we believe that a specialised company would be more recognised and caters specific clients.


In addition the learning cycle improves our knowledge and makes us better. By being too diversified such as dealing with construction projects such as dams and malls, airports and factories, we would be spreading ourselves too thin and wouldn’t stand out for a specific industry. Being specialised has added to our portfolio which makes clients approach us on a daily basis. We have a good track record of more than a couple of billion Emirati dirhams of projects completed in the MENA region in Saudi Arabia, UAE, Egypt, Yemen, and now we are planning to expand more. What are the some of your new projects? Now we have discussions going on for more projects in different emirates in the UAE. A month ago we just signed a project in Ajman for a miniature medical city with a hospital which is going to handle 50 to 200 bed hospital, with centres of excellence and accommodation buildings. In Egypt we are currently working on a project in Cairo, which is a 300 bed hospital handled by Saudi German hospital which we are planning to hand over in seven months. We are also working on an educational project, a teaching hospital in Jeddah that is a mix between a non-for-profit teaching hospital and a teaching hospital. There are a couple of residential complexes in Saudi Arabia and a medical tower project in the South of Saudi Arabia taken a month ago. We have also completed a number of projects in Saudi Arabia which includes mixed use

IHCC HEAD OFFICE, JEDDAH

Construction Business News ME March 2015 47


Q&A

MEDICAL CITY, JEDDAH

SAUDI GERMAN HOSPITAL LOBBY, DUBAI

and residential projects including apartments, condominiums for real estate development companies and more. All of these things keeps us engaged and adds to our knowledge, credibility and speciality, creating a unique standard. How is building or renovating a hospital more challenging than any other residential or commercial building? Building hospitals is not a common business; they are not like any other construction projects. If you think about a hotel project, what are the clients or the people in the hotel going to complain about? There would be complaints about the food, or smoking rooms. The complaints are not that major but when you deal with a hospital, each patient is unique. They have different needs, injuries which require 48 Construction Business News ME March 2015

dissimilar surgeries. When you decide on a project you have to be very careful in the planning stage. You have to be very sound and safety cautious, with extra precautions against germs and infections. Safety and quality is extremely important. Planning is key. Especially in cases of renovation, hospitals cannot just shut down. If a hotel is being renovated you could just shut it down but a hospital cannot. There are patients that are being treated, and it depends on their lives. Healthcare is not a luxury it is a necessity. People use hospitals to get treated, it is done for their survival. You have to plan your renovation and construction properly in phases so that the workflow of the renovation does not interrupt the patients or the traffic flow of the hospital.

Do you plan for expansion while working on a building project? Hospitals expand on a frequent basis, you have hospitals that have 50 beds and then they grow to a 100 beds. If the number of patients grow, the hospital needs to expand. A project must be planned in such a way that expansion can be possible and it does not get stuck in the future. It is the responsibility of the turnkey company to put themselves in the client’s shoes and not just think about the current building project and getting done with it. You have to put yourself in the clients place and think about the future. What are his needs? What is he going to face? What he might need in the future? In case of expansion there are several things to be kept in mind during construction such as if you want to expand vertically and have only two elevators, how are all these people going to get to the top floors? So you have to plan for other shafts and other elevators, so that if the expansion does go vertical you could add to these shafts without breaking any slabs or anything in the building and causing major damage to the building. On the other hand if you are going to expand horizontally, is there enough land in the surrounding area? It is a complicated experience that needs thought, experience, connectivity, and communication.


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FORECAST

REAL EXPECTATIONS After a major dip in the last few years, the real estate sector maintained a sturdy growth in 2014. Lorraine Bangera speaks with industry experts who predict the industry’s potential in the upcoming year keeping possible growth barriers in mind

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fter numerous highs and lows the property sector is finally going to remain stable. Tasweek, real estate development and marketing firm, predicts that despite global challenges the real estate market will remain attractive this year. According to the firm, positive microeconomic, regulatory and population factors continue to drive growth across the country. Simon Gray, Managing Director at Chestertons MENA, says that the real estate market has evolved considerably in the UAE. He says this bearing in mind all market participants, particularly the buyers who are more informed and aware now. Christopher Seymour, Partner and

50 Construction Business News ME March 2015

Head of Property at EC Harris, says, “The UAE real estate residential market is reaching a high point and we are expecting a cooling off in 2015.” Pointing out Jones Lang LaSalle recent report stating a 10% price reduction this year, Seymour says he sees this as a realistic projection. He says, “The rapid price rise and increased supply to the market in 2014 has driven the cool down but this should not be seen as a fundamental problem and more part of a natural cycle of a maturing real estate market.” Gray adds, “The legislative infrastructure has also been enhanced which only allows credible developers to take projects reducing risk of project cancellations. In terms of industry cycle the

market seems to be entering a stable growth phase.” Seymour says, “As the UAE has developed, where once end users would tolerate poor roads and incomplete utilities, they now demand completed, accessible and operational developments. They now have that choice and that is a positive development for the UAE.” For example, he says, even though Abu Dhabi and Dubai are prime areas, resort style developments are seeing a significant increase in emirates such as Fujairah and Ras Al Khaimah. Gray says that even though emirates such as Ajman and Fujairah have seen increased interest, their growth will also depend upon banks’ willingness to extend mortgage.


CHRISTOPHER SEYMOUR, PARTNER AND HEAD OF PROPERTY AT EC HARRIS

FACTS AND FIGURES Construction sector contributed 7.89% to Dubai's GDP in the Q1 of 2014 - Dubai Statistics Centre Domestic population was 9.9 million by the end of 2014 Population is expected to hit 18.83 million by 2023

However when considering the UAE as a whole, it is certainly doing well. A major factor that helped stabilise the sector is Dubai winning the Expo 2020. According to Gray, Expo 2020 is being perceived as a key event for the country and a stepping stone to other more large scale events in the future. Seymour suggests that the impact so far has been limited. However, he agrees that the Expo 2020 master plan, due to be submitted in Q3 of 2015, will increase development activity in due time. He says, “The Expo 2020 site in isolation will be well within the delivery capabilities of the existing supply chain to handle and the issue is more around the large number of projects which are coming to the delivery stage at the same

time both in Dubai, across the UAE and also the wider region.” “Luxury real estate”, he says, “forms one segment of the normal profile of a maturing residential market and country. It could be argued that previously there was an oversupply of high-end residences and a lack of choice in the mid to lower end bracket. The re-balance with more supply in the mid- priced bracket giving more consumer choice is one of the factors that has provided stronger fundamentals to the Dubai market. There still remains further appetite at the true ‘affordable’ end of the market and we are seeing a number of developers looking at solutions for this.” Gray agrees and says that the luxury real estate has definitely made property

attractive to international buyers and therefore has helped to attract foreign investment in the country. “However,” he adds, “a downside of this phenomenon has been lack of affordable housing in the country.” Affordable housing has been a key trend in the market, especially with the country rapidly growing in number. The population of the country reached 9.9 million last year compared to 3.6 million in 2004. Seymour says, that the country’s population is one of the world’s highest population growth rates, increasing at approximately 7.6% per year. He says, “The drastic population increase in 2014, drives further growth across various outputs such as property and infrastructure projects to name a few.” Construction Business News ME March 2015 51


FORECAST

DOWNTOWN DUBAI IS A POPULAR AND EXPENSIVE REAL ESTATE NEIGHBORHOOD

SIMON GRAY, MANAGING DIRECTOR AT CHESTERTONS MENA

Along with population growth, low oil prices is another factor that needs to be considered in the property sector. Gray says, “Low oil prices have added a new dimension to future performance of property market. Lower oil prices could impact the economy and add pressure to the property industry if they persist for the long-term.” Seymour says, “We do not at this stage see any slowing in developments in the property industry. It is very difficult to predict the future trending of the oil price in the region and the impact that any protracted volatility will have on the market.” He adds that if the trend continues it will certainly reduce demand for resources and materials in the region which, will to some degree, suppress the rate of construction cost inflation. Currently investment on social infrastructure, economic diversification investment and event-driven construction are three key trends positively influencing construction spend in the region according to Seymour. He says, “Whilst UAE is the second most expensive regionally, it is a relatively small market when compared to others on the rankings a currencies whereby market constraints are driving inflation and price movements.” Gray says that higher construction costs are a key concern for developers in the UAE, particularly for affordable housing projects that have been planned. He says, “High construction makes the economics for affordable housing unviable. This has also been a reason for cancellation of many projects which were rendered unprofitable as construction costs jumped in 2007/2008.” 52 Construction Business News ME March 2015


Construction Business News ME March 2015 53


LATEST

ITALIAN INCLUSION

With Milan Expo 2015 coming up later this year, Italian delegation make their way to the UAE to establish a bridge between the two countries and strengthen bonds. Lorraine Bangera reports ITALIAN DELEGATES ADDRESS THE PRESS HELD AT RTA HEAD OFFICE

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his February, the UAE opened its doors to Italian professionals who entered the country with a trade mission. The Italian Trade Agency in Dubai along with the Embassy of Italy in the UAE and the Italian Contractors Association (ANCE), organised the mission dedicated to the construction & infrastructure industry. The mission included 55 Italian companies from the civil and infrastructure construction sector. Most companies on the list were large Italian companies already operating in the UAE such as Anas, Astaldi and Trevi. While others included companies approaching the country’s market for the first time. Major banking groups also took part in the mission along with the Italian Export Credit Agency (SACE).

54 Construction Business News ME March 2015

On February 19th, three delegates from ANCE, Italian Trade Agency and the Embassy of Italy addressed a press conference about furthering the partnership between the UAE and Italy. ANCE is the Italian Contractors’ Association which represents 20,000 private companies, specialised in public works, housing, commercial and industrial, environmental protection, promotion and building finishing work. During the press conference at the Roads & Transport Authority head office Massimo Rustico, Head of International Business Development at the ANCE, said that Italian construction companies have been involved in some of the world’s most iconic projects such as the Panama Canal by Italian builder Salini Impregilo. He emphasised how Italian construction has been eminent

throughout history and attracts tourist from all over the world even today. “For example, the Colosseum has been standing for roughly 2000 years and fascinates millions of visitors every year,” said Rustico. Today the Italian construction industry has expanded on a global level and operates across 90 countries. Its presence in the GCC countries has recorded the highest growth in 2013, accounting for more than the 36% of the total new acquisitions in terms of dollar value. In 2014, the value of projects in the GCC amounted to US$85.15 billion, compared to $66 billion in 2013. Saudi Arabia, UAE and Qatar have been the driving forces in the region when it comes to construction and infrastructure. The UAE is particularly doing well after the ground lost due to international


UMBERTO BERNARDO, DEPUTY HEAD OF MISSION AT THE EMBASSY OF ITALY

ITALIAN DELEGATES AT THE PRESS CONFERENCE HELD AT RTA HEAD OFFICE

financial crisis. Winning the bid for Expo 2020 was the big push that helped the industry recover in full speed. It is estimated that the total costs for Expo-related works, including infrastructures and transport, will amount to $6.5 billion. Moreover it is estimated that, in 2015, the total turnover of the construction industry will reach an estimated $50 billion, compared to $24 billion in 2012. Umberto Bernardo, Deputy Head of Mission at the Embassy of Italy, said, “We supported the UAE during its bid for Expo 2020. At the moment we are trying to bring the two countries closer through the Milan and Dubai Expo.” Rustico said, “The Milan Expo 2015 starts this May, and there will be a tremendous partnership in order. We can see a lot of drive to bring new

Italian companies to the UAE with the cooperation of the Italian government, banking and building companies.” Bernardo adds, “Through Milan Expo 2015, Italy will showcase what we are capable of.” The delegation emphasised how Italy wants to develop its image in terms of what it offers to the world. Rustico says, “Italy is the second largest exporter of construction machinery in the European Union after Germany. We are known for our design and fashion but now we want to emphasis on our high-end technology and industrial machinery. “In terms of export, some of the top exports to the UAE include gold, industrial machinery and fashion, in that order.”

FACTS AND FIGURES • 500 Italian companies currently in the UAE • Yearly turnover of Italian construction industry $130 to $150 billion • The construction industry contributes to 10% of the Italian GDP • Italian construction industry operates in almost 90 countries across 5 continents

FEBRUARY 17, 2015

• A general overview was conducted of the market and the industry. This included the regulatory framework and operations in the UAE • Meetings at the Abu Dhabi Chamber of Commerce with leading real estate developers and contractors • The main governmental projects underway for both civil and infrastructure were presented both at the Abu Dhabi Department of Transport and the Tourism Development & Investment Company

FEBRUARY 18, 2015

• The Italian delegation met some of the largest developers in Dubai including Nakheel, Emaar, and Damac

FEBRUARY 19, 2015

• Targeted meetings organized by EXPO Dubai 2020 Commission, the Dubai Road & Transport Authority and the Dubai Municipality to learn about the works planned for EXPO 2020 Construction Business News ME March 2015 55


COMMENT

THE PRICE IS RIGHT KSA’s affordable housing deficit: Bridging the gap between supply and demand Written by Mohamad Rabih Itani

O MOHAMMED RABIH ITANI, CEO OF BEST CHOICE

56 Construction Business News ME March 2015

wnership of affordable residential properties in Saudi Arabia has been the subject of heated discussions among leaders, experts, and the masses in the Kingdom. The main theme of the debates and dialogues is the fact that demand from the low- and middleclass segments of society is quickly outstripping the supply of inexpensive housing units. It is a challenge that requires both short- and long-term solutions attainable through continuous collaborative efforts between the public and private sectors. Their partnerships are especially crucial given that experts are not expecting a slowdown in demand any time soon. With the housing deficit projected to reach about two million units over the next 10 years, it is a tall order to keep

up with the strong demand. The increasing Saudi population, which quadrupled to around 30 million over the past four decades, is the key growth driver. However, only 30% of citizens are currently homeowners and this can be attributed, among others, to the fairly young Saudi population - a large segment of who are under 30 with low financial capabilities. Couple these factors including a high urbanisation rate and a significant drop in household size results in a degree of demand that continues to steadily ascend. Further compounding the situation is the lack of available land for housing projects. Many of the prime plots are owned by the Kingdom’s wealthiest families who see their properties as a long-term investment and thus have no plans of developing their lands at a high expense.


The Saudi Government has moved to bolster its programmes and initiatives over the past years to address the housing shortfall. In the first half of 2014, approximately 11,000 residential units were completed, bringing the total existing stock to an estimated 944,000 units. About 74,000 new homes are expected to enter the market by the end of 2016. The country also launched a 700,000-square-metre low-cost housing development in Al Jammom in November of 2014, while two prime areas in Jeddah have been allocated for mega property developments spanning 31 million square metres. Many new projects – both affordable and luxury housing - are expected to be launched in the next five years across the country. Aside from constructing new afford-

able stocks, the Ministry of Housing has been allocating pieces of land and unveiling financial schemes for Saudi families living in rented accommodations as well. On idle, underdeveloped lands, meanwhile, many owners - upon the urging of the Saudi Government - are now either selling or developing their properties to capitalize on the flourishing real estate sector now valued at more than SAR 1.3 trillion. With increased activities and strong government support to the property segment, Saudi Arabia has been generating significant interest from private investors and developers. Strategic changes in the sector, high demand, demographics, and rapid infrastructure and economic developments are leading to more substantial opportunities. We at Best Choice believe that the

Kingdom still has to narrow down the gap between housing demand and supply. In the process of resolving the housing shortage, the local property market will continue to grow further through the government’s strategic measures and policies and continuous collaborations with the private sector. The local industry provides many opportunities not only for developers but also for construction companies as well. It is important for the government to continuously inject new energy into the sector in order to sustain this growth as well as the private sector’s confidence. Mohamad Rabih Itani, is the Chief Executive Officer of Best Choice Real Estate Investment, a Saudi Arabian real estate investment and development firm based in the Gulf. Construction Business News ME March 2015 57


EVENT PREVIEW

BIG 5 KSA CELEBRATES 5 YEARS IN THE INDUSTRY After five successful years, The Big 5 show returns this year bigger and better. With over 7500 innovative products displayed by over 500 visitors, this year’s show is going to be the largest till date

K

SA’s international building and construction show, will be held from March 9 to 12 at the Jeddah Center for Forums and Events. The event has successfully grown by nearly 90% over the past four years. It brings together thousands of visitors and exhibitors to showcase front-line construction products and innovations from across the globe. Construction being a key sector in KSA, provides a platform for local business to develop opportunities in employment and house building. In 2014 alone, it is estimated that US$75 billion construction projects were awarded, and an estimated $200 billion in contracts will be awarded over the next two years. Last year included a two day Seminar Series that were free to attend. This year the event will include a free to attend Continued Professional Development (CPD) certified education courses for attendees. This seminar series will give attendees free access to 12 sessions and panel discussions including 5 project showcases. All these educational features will help visitors further their construction careers. Nathan Waugh, Event Director, for The Big 5 KSA, said: “The Saudi construction sector is one of the most significant economic drivers in Saudi Arabia, and has played a major role in the country’s development.” Mr. Ahmed A. A. Al Ansari, Commercial Division Manager, Qatar Steel said, “The Big 5 Saudi provides Qatar Steel with a unique opportunity to demonstrate our capabilities on an international platform, allowing us to directly target potential customers and interact with global construction industry leaders.”

58 Construction Business News ME March 2015


20th-21st April 2015, Dubai

Leaders in Architecture Events Series International Speakers CHRIS JOHNSON RIBA, ARB-Managing Principal, Gensler

MOHAMED AL ASSAM Executive Chairman, Dewan Architects

SIMON MOON CEO, Atkins Middle East

HARRY DOWNIE CEO, RMJM International

STEPHEN JOHNSON President, Cannon Design International

CHARLES DALLUGE President, DLR Group

LEONARD CASTRO Senior Vice President, Business Leader - Buildings, Stantec

IAN APSLEY Main Board Director, Broadway Malyan

STEPHEN REDFERN President, Kuryłowicz & Associates

SHAWN BASLER Principal and Executive Director, Perkins Eastman

JAMIL JADALLAH MD and Principal, National Engineering Bureau

MICHAEL FOWLER Managing Director Middle East, Aedas

STEVEN CHARLTON Prinicipal Managing Director, Perkins+Will MENA

BRIAN JOHNSON Principal and Managing Partner, Godwin Austen Johnson

MUFADHAL ABBAS SHKARA Senior Vice President & Board Member, Zuhair Fayez Partnership

DANIEL HAJJAR Senior Vice President and Managing Principal, HOK

RALF STEINHAUER VP Hospitality MENA, RSP Architects

SIMON THOMAS Vice President, Middle East and North Africa, HKS

STEPHAN FRANTZÉN Group Director, P&T Group

SIMON FRASER MD Middle East and Asia, Hopkins Architects

MARK POWELL KYFFIN Head of Architecture, Abu Dhabi Tourism & Culture Authority

PEDRAM RAD Managing Director, U+A Architects

PROF. SHAMS ELDIEN NAGA Founder, Director, NAGA Architects, Designers & Planners

PHILLIP JONES Principal, Managing Director – Middle East and North Africa, B+H Architects

ELIE GEBRAYEL Chairman/CEO, Erga

NASSER ABULHASSAN Principal, AGi architects

TIM MAKOWER Founder, Makower Architects

.

Leaders in Architecture Events Series Partners

Construction Business News ME March 2015 59


SAVE THE DATE

MARK YOUR CALENDAR

CBNME’s picks the latest and most sought-after exhibitions, conferences and seminars coming up in the next few months Middle East Coatings Show The show is still the only dedicated coatings event in the Middle East and Gulf Region for raw materials suppliers and equipment manufacturers for the coatings industry. The event provides a unique platform for suppliers to present their products and services and be face-to-face with the most influential decision makers operating within the market in a relaxed and intimate environment. Date: 9 – 11 March 2015 Venue: Dubai World Trade Centre, UAE

Cityscape Abu Dhabi This April Cityscape Abu Dhabi will exhibit products and services from various sectors including banking, retail, hotel, leisure, infrastructure and design. The national exhibition will unite real estate professionals from across the region to meet local government authorities, developers, consultants, architects, designers and investors. Date: 21 – 23 April 2015 Venue: Abu Dhabi National Exhibition Centre, UAE

Smart Skyscrapers Summit The event will attract over 300 senior architects, engineers, policy-makers, developers, contractors and building managers from across the MENA region. Smart Skyscrapers Summit offers a platform for networking and exchanging information required for building and maintaining world-class skyscrapers in the Middle East. The event will include presentations and case studies from local and international experts. It will also showcase some of the most innovative building technologies, design principles and solutions from across the globe. Date: 11 – 12 May 2015 Venue: Sofitel Dubai the Palm Resort & Spa, UAE

Middle East Rail Middle East Rail is the only regional rail conference and exhibition run in partnership with the UAE government. The con60 Construction Business News ME March 2015

ference focuses on railway development strategy and technology for government officials, rail operators and contractors. Over 7000 transport, construction and logistics professionals will be brought together to help develop solutions in the infrastructure. The exhibition will provide presentations of how to build, operate and maintain railways and tunnels as well as strategies for rail revenue management. Date: 11 – 12 March 2015 Venue: Dubai International Convention and Exhibition Centre, UAE

FM Expo With over 7500 visitors last year, the exhibition will showcase latest products and services to facility managers, civil engineers, maintenance managers and operation managers. It will unite experts to discuss trends, challenges and best practice across the market. The FM Expo will be co-located with Middle East Waste & Recycling and Commercial Cleaning & Hygiene and Elevators & Access Control. Date: 18 – 20 May 2015 Venue: Dubai World Trade Centre, UAE

Middle East Stone The Middle East Stone is exclusively dedicated to the stone, marble & ceramics industry. It will showcase latest technologies from over 150 exhibitors. Visitors will have a chance to witness live demonstrations and see the latest technologies from machinery to complex processing equipment. It is the platform to meet with the top global suppliers of construction and decorative products and equipment. Date: 18 – 21 May 2015 Venue: Dubai World Trade Centre, UAE


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EXHIBITION SPACE The largest and most influential property investment exhibition in Abu Dhabi is back! With hundreds of developments from the UAE and overseas being showcased, Cityscape Abu Dhabi is your prime location for real estate investment.

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EDITOR'S PICK

DUBAI’S OLDEST MASTERPIECE

ENTRANCE OF AL FAHIDI FORT

The heritage of the UAE embraces a vast array of handsome forts and watchtowers that have stood the test of time. This month, CBNME takes a look at the oldest building in the Dubai which has sustained and survived the last 200 years of aggressive development around it

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mid the hustle and bustle of Dubai lies Al Fahidi Fort, a little forgotten but still standing strong. The fort has been the longest standing building in the emirate, and now appropriately houses the Dubai Museum. Rapid construction has been on the rise in the last 20 years and Dubai has constantly topped the list of cities with the most iconic building projects. Built in the late 1790s, Al Fahidi Fort was erected as a fort and built with cannons and battlements. When it comes to building in the region, the architectural concepts revolved around three important factors: the hot and humid climate, the religion and customs of its people, and resources and building materials that was locally available. The buildings were constructed close to one another to reduce heat, with narrow alleys running in the middle and ending at the creek. The fort was constructed to face the Creek, which was decisively done to defend Dubai if there were to be attacks from the sea. It was also used as the residence for the ruler and a shelter for people in case of an outbreak. Major expansions were carried out during the 1850s, under the leadership of the Late Sheikh Maktoum Bin Buti. In 1970, the fort was converted into a museum, and is still one of the

62 Construction Business News ME March 2015

must-see attractions for tourist to get a glimpse into historic Dubai. The fort is now situated in the heart of the city, a meeting point for the old and the new. It lies in the Al Fahidi Historical District which is one of the most significant sites in Dubai. The museum has an extensive display of dioramas, archaeological pieces and artifacts.

DISPLAY OF HISTORICAL ARTIFACTS INSIDE DUBAI MUSEUM


02 - 04 March 201 5

Construction Business News ME March 2015 63


64 Construction Business News ME March 2015

Construction Business News ME - March 2015 issue  

This month's cover story takes a look at the after effects of the dip in oil prices on the construction industry following the crash that hi...

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