The big MEP rebound

• The most demanded services within the construction sector are MEP;
• The market was valued at US$13.53 billion in 2008. This is estimated to reach US$22.44 billion in 2013, at a compound annual growth rate of 10.6%;
• The fragmented and highly competitive market is likely to take off in 2011;
• Saudi Arabia, Qatar, and Abu Dhabi are expected to shore up the market for MEP services till 2013;
• Many civil contractor companies/real estate developers are trying to enter the MEP services market; and
• MEP service providers are trying to get into the FM services business as a value-added resource.

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A surge in population, economic expansion and subsequently higher investments in real estate and infrastructure projects have generated considerable oil revenues and consequentl, cash reserves, aiding the exponential growth of the GCC construction sector. This development of the construction industry bodes well for the MEP services market, since it is considered an integral service within the construction industry.

New analysis from Frost & Sullivan, entitled ‘Strategic Analysis of the Mechanical, Electrical and Plumbing Services Market in the Middle East’, finds that the market earned revenues of US$13.53 billion in 2008, and estimates this to reach US$22.44 billion in 2013, at a compound annual growth rate of 10.6%.

The fragmented and highly competitive market is likely to take off in 2011, once the effects of the recent economic slowdown and reduced construction activities wear off and the economy rebounds.

Nevertheless, Saudi Arabia, Qatar, and Abu Dhabi are expected to shore up the market for MEP services till 2013, as their economies are relatively insulated from the financial downturn, thanks to their surplus cash reserves and the latest stimulus package announced by the government.

“Moreover, improved awareness about energy and environmental sustainability, as well as public health and safety concerns, are expected to go a long way in boosting the market for MEP services in the next five years,” says Frost & Sullivan research analyst Vivek Vijayakumar. “Already the most in-demand service of the construction industry, MEP’s popularity will soar further with the strengthening of the GCC’s commercial, residential, hospitality, infrastructure, and educational sectors.”

Meanwhile, the GCC has mandated all types of buildings to install technologies and services that will make them environment-friendly. Owing to such constant demand, contractors are continuously upgrading their services by investing in in-house pre-fabrication, design, and service capabilities to diminish the strong bargaining power of the end users.

Such measures will involve dealing with the escalating cost of construction, construction commodity prices, and labour cost. The prices are not likely to decrease due to the steady global demand and rising accommodation costs of labour, which could severely constrict contractors’ profit margins.

The market could also be adversely affected by the labour drain, as emerging economies are drawing labourers away from the region. In such a scenario, it has become vital for a company to recruit and send employees to training institutions to hone their skills, initiate training in-house or provide on-the-job training.

However, contractors can skirt the issue of manpower through technological developments, which will limit on-site prefabrication and thereby lower time and manpower needs on-site and boost productivity hours. Additionally, the involvement of design engineers in the early stages of construction and correct selection of materials will ensure proper building integration and sustainability by reducing its operating costs.

“To gain a competitive edge, it is critical for MEP contractors to offer scalable and comprehensive contracting service solutions as a one-stop shop, and back it up with effective qualified manpower for project design, installation and service support,” notes Vijayakumar.