The UAE has become synonymous with glitz and tall towers. In 2010 the tallest and glitzyest tower of them all was completed, The Burj Khalifa. The tall towers of the UAE could be attributed to a well told story, one of the late Sheikh Zayed (the UAE’s founder) standing on a beach looking through a View Master at images of New York. As the story goes, His Highness stood on a beach in Abu Dhabi and said he wanted ‘that’ for his people.
Legends aside, the landscape of the UAE has evolved from sand dunes and stone huts to hotels and hybrid transport systems. The change started in the late 90s with pace increasing at the turn of the century. In 2002 laws were passed to allow foreign nationals to buy properties on a 99 year lease. This development created the construction boom that led to the tall towers we see today.
The UAE’s economy today is very different to that of the pre-boom era. Diversification away from oil dependence has created a stable place to do business. Dubai is well known as a tourism hotspot, the UAE is the world’s third largest re-exporter of diamonds; commerce has given the UAE a competitive advantage in the region. This means it is unlikely the UAE will suffer another real estate boom and subsequent bust. The UAE construction industry is now as predictable a business as any.
Research from JLL MENA shows approximately 14,000 residential units will enter the Abu Dhabi market in 2017-18. 46,000 units are expected in Dubai for the same period. JLL also anticipates 525sqm (GLA) in office space, and 770sqm (GLA) of retail space will come online. The advantage the UAE market has over the UK is that the UAE is still developing in almost all areas of the country.
Furthermore, the UAE creates real estate in a short period of time. Yas Island was little more than sand in 2005, but in 2006 Aldar Properties announced development and a decade later Yas is home to Ferrari World, a Grand Prix track, a large retail park, high-end villas, and more. When talking about construction in the UAE we’re talking about development in a large scale projects rather than redevelopment of urban areas (although that work is also underway).
Contracts
The UAE’s legal system is based on Civil Law (as opposed to the Common Law system of the UAE). However, companies operating in the UAE may be able to use the DIFC Courts by adding clauses to contracts. The DIFC Courts is an English language court based on the UK’s common law system. FIDIC contracts are often found in the private sector with all variants of the book used. The UAE’s mega-projects are managed by a master developer (usually semi-government) and projects within the masterplan are allocated to sub-contractors.
Letters of intent are recognised in the UAE as long as they contain specific mention of the task to be performed and that there is no doubt of mutual agreement. There is however no legal requirement for a construction contract to contain clauses related to insurance but due to the use of FIDIC contracts most contain all or some of the following:
- All Risk Insurance
- Public Liability Insurance
- Delay in Start-Up Insurance
- Decennial Liability Insurance
- Professional Indemnity Insurance
- Worker’s Compensation Insurance
Medical insurance for residents is compulsory and is paid for by employers. There is no mandate for a company to supply insurance for an employee’s family. ‘Pay when we get paid’ clauses are permitted in the UAE and are usually used by subcontractors.
Price competition is fierce in the UAE due in part to so many companies vying for work. The UAE is geographically central and as a result firms operating in the country hail from as far east as the UK is west. UK firms are unlikely to match Asian counterparts on cost but do have the distinct advantage of being British. In the GCC British means quality, there are few countries globally that have managed to build as strong a reputation as Britain has here.
Some of the UK’s largest construction and real estate firms operate in the UAE. Dutco Balfour Beatty, Al Futtaim Carillion, and Interserve, are all present. Knight Frank and the aforementioned JLL are market leaders and there are a multitude of smaller but successful firms operating in every area. CoreNet Global and similar groups offer a familiar social base for new entrants to take advantage of and Cityscape Global in Abu Dhabi attracts public and private companies from throughout the region.
Construction in the UAE continues.
