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Dubai construction needs major project launches

25 April 2023

Related reads on the UAE's construction and transport sectors:

> Two billion riders use Dubai Metro

> Residential property close to Dubai metro outperforms market

> Local firm wins Jubail Terraces contract in Abu Dhabi

> Foster designs Dubai’s first vertiport

> Damac launches new project in Dubai Business Bay

> Dubai returns to the iconic with Candy towers project

> Nakheel awards Jebel Ali Village construction contracts

> Bloom appoints contractor for Abu Dhabi project

> Firms seek to qualify for UAE-Oman rail works

 

Growing demand for property in Dubai combined with a resilient economy have brought winds of optimism to the emirate’s real estate market. At the same time, the government’s handling of Covid-19 and recent measures to improve the business environment have strengthened Dubai’s position as a safe haven.

Over the past year, there has been record demand for premium properties in the emirate, mostly driven by wealthy international buyers from markets such as Russia, India and Europe.

According to a recent report by Luxhabitat Sotheby’s International Realty, Dubai’s super-prime residential market enjoyed a strong start to 2023, with a 24.9 per cent increase in prices per square foot compared with the previous quarter.

The upswing has resulted in developers launching a number of new schemes. Projects announced in recent months include Al-Habtoor Group’s estimated AED9.5bn three residential developments; Shamal Holding’s Baccarat Hotel & Residences in Downtown DubaiDamac Bay by Cavalli.

In Jumeriah Lake Towers, Dubai Multicommodities Centre in partnership with Ellington Properties has launched the AED1.2bn high-rise mixed-use Upper House project, while in Meyan MAG Property Development is developing the AED3bn Keturah Reserve residential scheme.

New masterplans have been conceived too, including the estimated $5.4bn mixed-use Dubai South project announced by Azizi Developments in January 2023.

Dubai is also returning to what it is known for: eye-catching, iconic projects. Later this year, a joint venture of Dubai World Trade Centre and the UK’s Candy Capital is expected to announce a three-tower project billed as a super-prime real estate development in Dubai’s One Central commercial district. The UK firm is known for London’s One Hyde Park, one of the wealthiest property residences in the world.

Slow recovery

Yet a closer look at the number of awarded contracts in the construction and transport sector reveals that the market is still playing catch-up, despite the growing hype.

The value of contracts awarded increased only slightly from $6.8bn in 2021 to $8.42bn in 2022, according to data from regional projects tracker MEED Projects. This is still far off the pre-pandemic level of $13.6bn in 2019. It is also only a fraction of the value of awards in 2016 and 2017, when signed contracts totalled $24.68bn and $26.14bn, respectively.

The backdrop to the weaker value of recent awards is the dearth of major construction contract awards as the government cut spending on major infrastructure projects. This has led to the market being driven mainly by private real estate developers launching smaller projects.

A few exceptions stand out, including the $260m contract awarded in January to China State Construction Engineering Corporation to construct Damac’s Cavalli Casa tower. Moreover, there are clear signs that the trend is changing. 

In addition to these projects, there are several other large-scale projects in the works, such as the estimated $1.2bn Waldorf Astoria Hotel by Al-Habtoor Group and Nakheel’s revived Palm Jebel Ali project, for which $4.6bn in funding was secured in November 2022.

The Palm Jebel Ali is about three times larger than the Palm Jumeirah, and will significantly increase the amount of waterfront land available for development in Dubai.

The soon-to-be awarded MGM Resort, Bellagio and Aria Hotels development by local developer Wasl is estimated at $500m. The three hotel resorts will be constructed on a man-made island off the coast in the Umm Suqueim area. The scheme is expected to feature 1,400 hotel rooms and apartments, in addition to retail, food and beverage and entertainment options.

Transport awards

It is hoped that the award of major infrastructure contracts may also restart this year, with the upcoming extension to the Dubai Metro network. After being put on hold, the scheme moved to the design stage in 2022. 

The Blue Line project involves constructing more than 20 kilometres of new lines, about half of which are underground, in order to extend the existing Red and Green lines.

Dubai is also considering plans to restart the emirate’s largest construction project, the AED120bn ($33bn) expansion of Al-Maktoum International airport. 

The expansion was officially launched in 2014. It involves building the biggest airport in the world by 2050, with the capacity to handle 255 million passengers a year. An initial phase, which was due to be completed in 2030, will take the capacity to 130 million a year.

Tendering for work on the project stalled with the onset of the Covid-19 pandemic in early 2020.

The margins became negative in the sector, and we cannot compete with the local companies or the government-backed Chinese corporations

International contractor

Contractor sentiment

The sector’s incomplete recovery from the pandemic is confirmed by the net value of contract awards, calculated by subtracting the value of completed work from the value of awarded work. 

Since 2018, the value of awarded contracts has been smaller than the amount of completed work, meaning contractors have fewer upcoming jobs.

Under these circumstances, companies that specialise in major construction projects are looking to other markets. 

“The UAE market is too calm. There is not enough work for us,” a local contractor tells MEED. “We are looking to expand our activity to Saudi Arabia. The work is there now.”

Some international companies, having faced long payment delays or financial losses, have left the region. “The margins became negative in the sector, and we cannot compete with the local companies or the government-backed Chinese corporations,” said one international contractor.

As it stands, there are over $42bn of projects in the bid, design and study stages in Dubai, according to MEED Projects. 

If major projects, such as the Al-Maktoum airport expansion, move into construction, they will provide a major boost for Dubai’s construction and transport industry.

This month's special report on the UAE includes: 

> GOVERNMENT: Abu Dhabi strengthens its position at home

> ECONOMY: UAE economy steers clear of global woes

> BANKING: UAE lenders chart a route to growth

> UPSTREAM: Strategic Adnoc projects register notable progress

> DOWNSTREAM: Gas takes centre stage in Adnoc downstream expansion

> POWER: UAE power sector shapes up ahead of Cop28

> WATER: UAE begins massive reverse osmosis buildup

> CONSTRUCTION: Dubai construction needs major project launches

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Eva Levesque

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    In a region where geopolitical turbulence has amplified by an order of magnitude, Jordan is managing to stand out as a beacon of relative stability, with the Hashemite kingdom’s banking sector acting as a case in point.

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    Jordan’s banks look able to withstand further shocks, given solid capital positions and relatively strong earnings performances. Arab Bank, the largest lender, saw net profits grow 12% last year to $1.13bn, despite a highly charged geopolitical situation across Jordan and the neighbouring Palestinian territories.

    As Moody’s notes, Jordanian banks’ funding base remains stable, with banks mainly deposit-funded – with deposits at 67% of total assets as of December 2025 – mostly comprising well-diversified retail deposits. The ratings agency noted that banks retain the capacity to increase lending without relying on more volatile and costly external funding, as indicated by the 72% loan-to-deposit ratio.

    The earnings outlook in Jordan may be better than other banking sectors in the immediate region, but this does not translate into a picture of booming profits going forward.

    “Profits should remain resilient, but we’re not expecting any significant improvement,” says Theofilou. “We have the challenging operating conditions, and the lower interest rates that have come down over the past few years. On the other hand, banks have had lower provisioning in the past 12 to 18 months compared to the period prior to that.”

    Asset quality remains a strong point, despite some weakening over recent years. Moody’s sees non-performing loans (NPLs) falling below 5.5% this year from 5.8% in June 2025.

    However, the continuing Iran conflict and its deleterious regional impacts – including on the West Bank, where about 9% of Jordanian banks’ loans are located – suggest that bank exposures to troubled sectors will require focus.

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    Another challenge is the banks’ high credit concentration among large corporates, with a noted high exposure to real estate.

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    The real estate exposures are meaningful, but Moody’s views overall concentration risk as more material rather than real estate risk per se.

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    The CBJ has earned plaudits for its regulatory oversight, with the IMF lauding its strengthening of the Financial Stability Committee, while refocusing its role on macroprudential policies and systemic risks. 

    Jordanian banks’ brisk uptake of digital technologies has also been a positive.

    Last year, digital payment systems in Jordan recorded over 184 million digital transactions, exceeding $38bn in value. The CBJ has introduced an AI regulatory framework for the sector and the authorities are now working to burnish the country’s credentials as a fintech hub, based on a 90% plus internet penetration. 

    In the year ahead, Jordanian banks will be looking to find exposures to new lending opportunities, given the past risk aversion that has prevented them from building stronger growth avenues.

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    Big new infrastructure projects could yet come to the fore as bankable opportunities for local players. For example, the National Water Carrier Project, costed at $5.8bn and aiming to increase water supply by 40%, is looking to achieve financial close this summer. It is the type of project that could prove significant in helping diversify local lenders’ exposure away from real estate towards infrastructure.

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    So long as the regional conflict persists, banks will be inclined more towards caution than exuberance in their lending approaches. And yet that strong and stable inclination may be what serves them best in a notably turbulent year in the Middle East’s recent history.

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