Construction delivery drivers
In the UAE, government initiatives and investments play a crucial role in driving construction activity, particularly in infrastructure development, urbanisation and economic diversification. These efforts encompass various projects intended to improve transportation networks, utilities and public amenities to facilitate the country's connectivity. With its reputation as a global tourism and business hub, the UAE experiences a consistent demand for real estate development.
In essence, these factors collectively drive the dynamic nature of the UAE's construction sector, draw stakeholders from diverse industries and create continuous prospects for progress and advancement.
Survey findings:
of respondents cited the increasing cost of construction as a considerable challenge, with 34 percent ranking it as the top reason for project delays. This marks a noticeable increase from 2022, where 62 percent identified rising construction costs as a high-impact factor.
Difficult contractual and legal conditions remained a prominent concern, with 56 percent of participants noting it as a key factor, compared to 40 percent in 2022.
Concerns over excessive lead times and increasing contractor insolvency continue now as they did in late 2022, with 75 percent and 72 percent of respondents highlighting these issues, respectively.
Similarly, challenges related to skilled labour shortages and insufficient credit availability were identified by 50 percent of participants.
Interestingly, political stability continues to be perceived as having a low to no impact on project delivery, consistent with our findings from 2022, where 72 percent of respondents shared this sentiment.
Notably, factors such as lack of confidence in the market to invest in new projects, market uncertainty and government red tape were considered to have low to no impact on project delivery in both 2022 and today.
The most notable outcome from the survey was the sustained concern over rising construction costs. This correlates with other aspects of the report, such as the change in tendering approaches, whereby the balance of cost risk is split more evenly between contractor and client. Traditionally, under a lump sum fixed price, the risk of cost escalation would sit with the contractor, hence potential delays, whereas under either a negotiated, or single stage with provisional sum, approach escalation is considered right up until the point of award of each component.
Source: Turner & Townsend survey
“The UAE market has been innovative in many areas, but the contractual aspect of projects has fallen behind. This has caused delays and failures due to parties not agreeing on terms. As contractors gain more leverage in the market, clients are making changes to their approach and contract terms to distribute risk more fairly between both parties.”
Adam Ralph Country Manager, Dubai, Turner & Townsend
Other key issues identified by the report as having an impact to project delivery, included excessive lead times and increasing contractor insolvency. Perhaps somewhat surprising, was that political instability was not seen as having any major impact on project delivery. Despite other issues around the region and the globe, the UAE is clearly viewed as a very stable market and as such, less impacted by outside forces.
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