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UAE Construction Sector Shows Strong Growth Amidst Regional Challenges: RICS Report
Published 9 Aug 2024
The UAE’s construction sector is experiencing strong growth, driven by a continuing boom in real estate developments.
Source: Freepik
According to RICS Global Construction Monitor, construction activity in the UAE increased by 54%, showing positive growth in building projects.
Regional Comparison: Saudi Arabia Leads, UAE Close Behind
Saudi Arabia remains the strongest performer in the region and worldwide, with a Construction Activity Index (CAI) of +64, though this is slightly lower than last quarter’s +72. Mauritius and the UAE also saw robust growth, with their CAI readings rising to +57 and +54, respectively.
Challenges Facing the Construction Sector in the UAE
The Royal Institute of Chartered Surveyors (RICS) reports that the consistent growth seen across various sectors since the pandemic is likely to continue. However, challenges like skill shortages and rising material costs persist. Despite these issues, the sector is expected to keep growing.
Global Construction Trends: A Mixed Picture
Globally, construction activity is increasing, especially in parts of the Middle East, like Saudi Arabia, the UAE, and India. On the other hand, there is little sign of recovery in China and Hong Kong, and Qatar is facing a slowdown after the World Cup. Europe shows early signs of improvement, and feedback from North America remains positive, according to RICS chief economist Simon Rubinsohn.
Rubinsohn noted that the global economy’s uneven performance is affecting the construction industry, with financial concerns weighing heavily on many businesses. However, the lack of skilled workers remains a critical challenge as the industry tackles housing shortages and the need to improve infrastructure to address climate change.
Rubinsohn noted that the global economy’s uneven performance is affecting the construction industry, with financial concerns weighing heavily on many businesses. However, the lack of skilled workers remains a critical challenge as the industry tackles housing shortages and the need to improve infrastructure to address climate change.
Sector-Specific Growth in UAE's Construction Industry
The RICS report highlights that growth in the UAE’s construction sector is widespread across both private and public sectors. Private residential projects grew by +58%, private non-residential developments by +38%, and public sector projects by +59%. This trend of consistent activity has continued for nearly two years since the pandemic.
However, the UAE is also facing challenges that are typical of thriving markets. Key issues include a shortage of skilled professionals and rising material costs. Some respondents mentioned competition with Saudi Arabia for skilled workers and resources, which is driving up costs. Additionally, 61% of respondents noted that the hot summer weather is negatively affecting work.
Overall, the UAE’s construction sector remains stable compared to the previous quarter, and the consistent growth across different sectors is expected to continue. Despite ongoing challenges like skill shortages and rising costs, all indicators point to a sector that will remain strong in the near future.
However, the UAE is also facing challenges that are typical of thriving markets. Key issues include a shortage of skilled professionals and rising material costs. Some respondents mentioned competition with Saudi Arabia for skilled workers and resources, which is driving up costs. Additionally, 61% of respondents noted that the hot summer weather is negatively affecting work.
Overall, the UAE’s construction sector remains stable compared to the previous quarter, and the consistent growth across different sectors is expected to continue. Despite ongoing challenges like skill shortages and rising costs, all indicators point to a sector that will remain strong in the near future.
Construction Activity Trends Across the Middle East and Africa
In the Middle East and Africa (MEA) region, construction activity remains consistent with recent trends. The Construction Activity Index for the MEA region was recorded at +24 for Q2, slightly below the +26 recorded in Q1, but still showing positive growth for the 14th consecutive quarter.
Oman, Nigeria, and South Africa reported positive CAI readings, with South Africa’s index rising from -2 last quarter to +11 in Q2. In contrast, Bahrain and Qatar saw negative CAI figures, with Bahrain at -8 and Qatar at -28. Qatar’s reading reflects a further decline from last quarter's -17, continuing the downward trend in its construction market since the World Cup.
Oman, Nigeria, and South Africa reported positive CAI readings, with South Africa’s index rising from -2 last quarter to +11 in Q2. In contrast, Bahrain and Qatar saw negative CAI figures, with Bahrain at -8 and Qatar at -28. Qatar’s reading reflects a further decline from last quarter's -17, continuing the downward trend in its construction market since the World Cup.
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