Construction in the Middle East

Skyscraper Construction in emerging markets

Doing Business in the Middle East: Skyscraper Construction in emerging markets

During 2012, the world witnessed the birth of 66 extremely tall buildings around the world. In the 1980s, nine of the ten tallest buildings were in the United States, with one in Canada. Today, nine of the ten tallest buildings are in the Middle East and Asia. With that statistic comes the enormous engineering challenges and physical restrictions the construction of skyscrapers can entail.

The last few years were marked by the birth of the world’s tallest man-made structure, here in the Middle East – Dubai’s Burj Khalifa at 829.8m  – followed by an announcement from the Kingdom of Saudi Arabia of plans to build an even taller Kingdom Tower (Burj al Mamlakah, planned completion 2019) of 1000m. Residents admire this sort of landmark building as it is a reason to feel pride in their city. Tourists enjoy seeing these developments rising towards the heavens, some even planning to visit once open.

These mega projects create numerous job openings not only for specialist engineers and architects, but also for those in the construction business, builders and related supply chain service providers. The larger project gives rise to many related jobs and can have a positive impact on the local economy.

Some, however, see the creation of these mega-towers as an indication of economic crisis – whether there already, or soon to arrive. They believe that the construction of skyscrapers represents a mis-allocation of capital. If we look back at the US’ great depression of the early 20th century, we see the building of Wall Street, the Chrysler building and Empire State building.

Back to present day, China has plans for 124 skyscrapers – and is expected to complete around 65 of them in the next few years. India is completing 14 skyscrapers, including the Tower of India, which would be the second tallest building in the world unless records should be broken by another skyscraper (source: skyscraper index).

Why build so tall?

According to Keith Brooks, Head of Property at EC Harris (the company that won the Kingdom Tower (Burj al Mamlakah) contract project management in a joint venture with MACE UK), that over time there has always been three main reasons behind building tall buildings: wealth, power and the need for space.  He added that creativity, innovation and integration of the supply chain throughout the construction process are the best ways to overcome design and construction restrictions.

Construction on the mega level

Research undertaken by EC Harris shows that the UAE will spend $329billion on major construction projects between 2013 and 2030. An estimated cost of approximately $1bn will be delivered over a short timeframe, with a peak in 2016 with $40.4bn being handed over.

In the Middle East region, more than $1 trillion will be invested in infrastructure, energy, property and transport projects. The research found plans for $255bn of infrastructure investment in Saudi Arabia and $156.8bn in Qatar, which will offer massive opportunities for regional job creation over the same period of time.

Small and medium construction projects in emerging markets

The construction sector is considered as a vital economic sector in many countries, where it is believed that small- and medium-sized construction projects do create jobs, but most are only temporary.

In many countries, one can witness unfinished buildings, with many running into trouble with finances and planning, and inability to sell the real estate ‘off-plan’. Some projects stop because the property developer runs out of money, leading to very ugly scenes, broken dreams and completely useless shells of a building blighting the skyline of a city.

However, even in such risky economic times, why is the construction sector starting to grow again? According to one building owner in Jordan, it is a safe investment; nothing happens if building stops – it can always start again, your building won’t disappear (or hopefully shouldn’t)!

Many investors feel that in turbulent or unstable times, or even whenever they have money and a willingness to invest, the safest investment would be to build.  But why do some still build without clear plans of how to reach full occupancy or achieve a sale once complete? Many end up without tenants and in even greater debt. Construction for the sake of construction, in difficult economic times, might yet become the graveyard of investment.

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