Developers must accept the end of double-digit growth

Builders in the UAE and beyond must "align their expectations" to making a steady income, a project management expert says

Construction and development companies must get used to reduced margins, a market expert says [representational image].
Construction and development companies must get used to reduced margins, a market expert says [representational image].
Andrew Turner of Hepher Project Management.
Andrew Turner of Hepher Project Management.

Marcus Taylor, managing partner at Taylor Sterling Associates, talks to Andrew Turner of Hepher Project Management, about the end of double-digit industry growth and the challenges of refurbishments.

How do you predict the Middle East’s construction job market will shape up?

I think we are going to see a shift. The market optimism that has been created by the combination of Expo 2020 Dubai and Creekside Harbour is essentially going to shrink. The private sector has got to become re-energised. The unpredictability of cost over the last 18 months has made the environment very difficult for the private sector. The government has stepped in to try to limit the fluctuations in the prices of raw materials, which will help, but there has got to be increased stability of costs so that private developers regain their confidence to start developing again.

Speculative construction is nowhere near as common as it once was. Those that are still trying to sell off-plan are struggling because there is no predictability about what that revenue is going to be. We may even reach a point where yields on projects fall below acceptable levels. However, as the market becomes more sophisticated – which is happening in Dubai – things should become a lot more stable.

READ: High land costs curtail mid-market hotel construction

We need to become more accustomed to the fact that the days of double-digit growth may be behind us, and developers need to align their expectations to making a steady income. While yields and growth have declined in Dubai, they have never fallen below zero, in contrast to most other parts of the world. We now just need a level of pricing that supports steady growth.

How long have you been in your current role and which companies did you work for before this?

I have been with Hepher Project Management since the beginning of 2011, and took over my current role as managing partner in September 2015.

At the beginning of 1995, I seized an opportunity to come to Dubai for a hotel development and made the move here as a structural engineer. The hotel project was Jumeirah Beach Hotel, Burj Al Arab, and Wild Wadi, for which I became the design manager for the onshore hotel and onshore facilities. After handover of the Jumeirah Beach Hotel, I then took the head of engineering role in Atkins’ main office and was with the company for a further seven years. After leaving Atkins, I worked as a client, running the development of the Aqua Dunya Project in Dubailand, and the W Hotel, The Palm.

What does your company do?

We offer project management support services on a variety of project types. We take projects from the earliest possible point, assisting clients through feasibility, pre-construction, construction, and the handover phase.

When I came to the region, you could count on one hand the number of projects that had dedicated project managers assigned to them: the Chicago Beach Resort Development, Emirates Towers, and Deira City Centre.

Most developments had a traditional lead consultant that provided project and contract administration services. However, over the last 20 years, fees have not changed in real terms, but the requirements for the designers have increased significantly, so there is no more room within the designer’s remit to do all the project management.

That is where the need for third-party project management stems from, and that is where we fit in. We provide all of the essential project management services that used to be provided by the lead consultants.

What projects do you typically manage?

Our smallest could be approximately $270,000 (AED1m) for a fit-out. For example, we completed the fit-out for 100 Costa outlets over a four-year programme – the smallest of which was actually under $270,000 (AED1m) in value – but the total project value, due to the number of outlets, was much higher. At the top end, if we take on a project as the sole project manager and client representative, project values can be as high as $136m (AED500m). An example of a larger project we completed is the Swiss International Scientific School in Dubai.

What are the main challenges you face?

In addition to working on new-build projects, we have completed refurbishment projects, which are far more challenging. We have found the expectation of cost is often much lower than the reality of the investment required to complete a project of this type.

We have also been involved in the upgrade of existing facilities, such as the expansion of the English College in Dubai, which will see the gross floor area increase by approximately 100%. The primary challenge with this project is that the school must remain functional while we are building, and this is true of many upgrade and refurbishment projects. Also any work on an existing project can present challenges with approvals, as we are working around existing structures and services.

One of our main challenges right now is projects actually getting started. We have lots of clients, lots of good ideas, and a number of projects fundamentally ready to go, but no one is quite ready to give the green light.

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