Bullish outlook for GCC construction from 2015-18

With a predicted total worth of $525.6bn, the UAE is expected to account for the largest value of GCC projects from 2015 to 2018, followed by Saudi Arabia, Kuwait, Qatar, Oman, and Bahrain

Sameena Ahmad, managing director of Alpen Capital Middle East.
Sameena Ahmad, managing director of Alpen Capital Middle East.

The GCC construction sector is expected to grow significantly from 2015-2018 as a number of naitons target economic diversification, according to a report from Alpen Capital.

The firm’s GCC Construction Report 2015 mentions that the growth will be driven by factors such as favourable macroeconomics, positive demographics, and rising tourism activities. The report adds that higher budget allocation towards the sector by the countries will add momentum to the growth.

The UAE is expected to account for the largest value of projects worth $525.6bn, followed by Saudi Arabia with projects worth $407.8bn. $123.6bn for Kuwait, $113.8bn for Qatar, and $29.6bn for Oman present a busy outlook for the GCC's construction sector.

The Gulf region is aiming to attract higher investments in its construction sector by hosting global events and showcasing itself as a preferred tourist and investor destination. This will result in the overall construction industry growing at a compound annual growth rate (CAGR) of 11.3%, from $91.5bn in 2013 to reach $126.2bn in 2016.

Sanjay Bhatia, managing director of Alpen Capital Investment Bank (Qatar), said: “The GCC governments challenge to diversify their economies from oil and gas and their consistent focus on infrastructure development across sectors has kept the construction industry in focus. Activity in sectors across infrastructure, residential, commercial, hospitality, retail, etc., have taken centre-stage in inviting global participation and attracting the attention of businesses and tourists alike. Although investments are directly dependent on the pace of each Government, we believe that the GCC region continues to be a desirable location with accelerating growth prospects for the near future."

The report also points out that demand for residences is steadily rising due to strong population growth, a large proportion of which is expatriate. The highest cumulative residential unit was recorded in Riyadh, followed by Jeddah, Dubai, and Abu Dhabi. Doha saw the lowest supply of cumulative residential units as of 2014.

Despite the positive growth outlook for the GCC construction sector, the report points out that it is not devoid of challenges.

Sameena Ahmad, managing director of Alpen Capital ME, said: “The dip in oil prices may push the GCC nations to restrict state spending, hampering the growth of the construction industry, which is materially dependent on government funding. Also due to high dependency on expatriate staff, the operations of the construction companies may be affected by the challenge of hiring the right talent and retaining them. Increased construction activity requires additional work-force which is not easy to source."

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