The construction industry in the U.A.E. is projected to grow 6.9%, reaching AED265,969 million ($72,401.3 million) this year, according to the latest report.
Amidst short-term challenges in some construction sectors, the U.A.E.’s medium to long-term growth will remain consistent.
The U.A.E. has led the growth of the global construction market in the past five years. With billions of dollars spent on mega infrastructure and commercial construction projects, the Emirates is aiming to cut down its dependence on oil and instead become a major tourist destination. As a result, investment in the construction of infrastructure and commercial projects, including resorts and hotels, is expected to grow further this year.
The United Arab Emirates Construction Industry Databook Series – Market Size & Forecast by Value and Volume, Q1 2023 Update reports that the country’s construction industry is predicted to grow over the next four quarters.
Growth will continue in the forecast period, posting a CAGR of 5.7% in 2023-2027. Construction output is expected to reach AED331,659.9 million ($90,283.5 million) by 2027.
Besides growth in the infrastructure and commercial constructions segment, the residential construction sector saw a solid performance in 2022. The volume of luxury housing projects increased over the last 12 months, driven by high-net-worth individuals buying luxury assets in the Emirates. The trend is projected to continue throughout the year.
This is expected to support the growth of the overall construction industry in the U.A.E. in the next three-four years.
BUILDING ON TOURISM INFRASTRUCTURE
With the country attracting millions of tourists globally, commercial property developers are looking to build on the tourism infrastructure to provide tourists with an immersive experience.
In January, the U.A.E.-based Modon Properties launched the Abu Dhabi desert resort, with one-, two-, and three-bedroom villas for tourists. The initiative aligns with the government’s strategy to diversify the UAE’s income and reduce the country’s reliance on oil.
Kempinski is set to open later this year with a pyramid-topped structure housing 150 rooms and suites and 12 luxury villas.
These projects, along with many others in the pipeline, will contribute to the growth of the commercial construction sector in the near to medium term.
DEMAND FOR LUXURY PROPERTIES
The demand for luxury homes is anticipated to rise further in the coming year. Foreign investors, including those fleeing the war in Russia and Ukraine, will drive demand for housing units.
Picking up on this demand, more construction developers and contractors are expected to pick up new luxury housing construction projects from the short to medium-term perspective, supporting the growth of the residential construction market.
As part of its $56 billion 2023-25 budget, the government announced that it would be making significant investments in the residential sector to support families with limited incomes.
DEVELOPMENT OF ROADWAYS
The government has announced a $1.36 billion investment as part of a 10-year development plan to relieve traffic congestion and build world-class transportation and roadway systems.
The development of roadways, coupled with other infrastructure projects, is expected to attract investment worth billions in private and public funding over the next three to four years in the Emirates.