Recording the flattest increase in construction costs from 2017 to 2018 has positioned the Middle East as a prominent market for build growth, a new report has revealed.
The annual Turner & Townsend International Construction Market Survey noted that the finance required to execute new projects in the UAE would increase by only 2% this year. The Omani capital Muscat will rise by 1%, a 50% drop on 2016-17 that made the city one of only three to experience a drop in costs.
Analysts calculated the average construction cost per sqm to be US$1,455 in the UAE and $1,338 in Muscat, ranking the two locations 28th and 29th internationally.
Analysts calculated the average construction cost per sqm to be US$1,455 in the UAE (pictured) and $1,338 in Muscat, ranking the two locations 28th and 29th internationally
Comparing the Middle Eastern data against that of 46 different markets positions the region as a tempting prospect in regards to less cost-heavy construction on a global scale. Worldwide costs are expected to increase by an average of 4.3% this year.
Turner & Townsend’s yearly report analyses input costs – such as labour and materials – and charts the average construction cost per m2 for commercial and residential projects. In recognition of the growing importance of Asian markets, the 2018 report includes Shanghai, Jakarta and Ho Chi Minh City for the first time.
“The whole Middle East region stands to benefit from the stabilisation and steady increase in oil prices, but it will take time for the effects to be felt in increased investment in new real estate projects,” said the report’s authors.
“Turner & Townsend’s research highlights that in the UAE, construction spending has been held up by Government investment in infrastructure ahead of major global events in the coming years such as Expo 2020 Dubai. This up-front investment by the state is expected to drive private sector development in hotels and leisure facilities ahead of the event.
“In contrast, as the Omani government nears completion of a number of major projects – such as the new Muscat airport – the state’s 2018 budget for development is down 17 percent from 2017. But private sector investment may offset this reduction, with increased interest in commercial development – including hotels – and infrastructure, such as the $2.6bn railway link to transport limestone from Al Shuwaymiyah.”
“Governments across the Middle East are taking active steps to diversify their economies and move away from their reliance on oil. This is a long-term challenge and, for the moment, oil prices remain the most important factor influencing capital investment decisions in the region. As prices return to stable levels and the region prepares for major events such as the Expo 2020 Dubai, both governments and private investors should focus on the opportunity to drive better outcomes from their investment plans,” said Alan Talabani, regional managing director – Middle East at Turner & Townsend.
“We need a worldwide shake-up of the industry model to bring about greater collaboration between investors, asset owners and the supply chain, incentivising innovation and rewarding those who deliver better outcomes. In the Middle East, this means greater sharing of risk and reward between clients and contractor, and such steps will help to reduce lengthy disputes and allow client to get a greater return on investment.”
To read the report in full, visit: http://www.turnerandtownsend.com/en/insights/international-construction-market-survey-2018/