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UAE MEP Market Q1 2018: Growth, Challenges, and Opportunities

This report provides an overview of the UAE MEP (Mechanical, Electrical, and Plumbing) market in Q1 2018, including macroeconomic factors, construction market trends, awarded projects, and key opportunities and challenges.

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UAE MEP Market Q1 2018: Growth, Challenges, and Opportunities

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  1. UAE MEP Market (Q1) A Board Level Report By Ventures Middle East Date: 01/05/2018

  2. Macroeconomic Overview Real GDP growth is forecast in the 3%-4% range over the next several years driven by a continued focus on economic diversification. UAE Real GDP • The UAE economy is one of the most diversified in the GCC and grew at an estimated 3.3% year-on-year from 2013-2014 onwards. Nominal GDP is estimated at a little over $400bn. Driving the UAE economy is increased trade, construction and finance activity, with renewed investor confidence in the economy, especially in Dubai, following the successful bid to host the Expo2020. • However, Abu Dhabi continue to rely on oil revenues and hence the UAE’s government expenditure on major construction projects in Abu Dhabi is following a slow and cautious route. • According to the IMF, non-oil GDP will be the real engine of growth, rising 3.3% this year, before hitting between 3.3% and 3.5% annually until 2022. furthermore, UAE non-oil exports (excluding re-exports) to surpass oil exports, as economic diversification picks up. UAE Nominal GDP Sources: International Monetary Fund, World Economic Outlook Database, October 2017

  3. Macroeconomic Overview A favorable economic characteristics and adjusting a fiscal policy to lower oil prices will prove to be conducive for an economic growth • According to Analysts, the UAE should pursue growth-friendly fiscal consolidation in light of continued tightening of monetary conditions and the Expo 2020 investment needs. • As seen in the last couple of years, the UAE government focused on achieving more synergies and mergers between major entities to increase efficiency, for example the merger of EMAL and Dubal, the two largest Aluminum Smelters in the region and the merger of First Gulf Bank and National Bank of Abu Dhabi. • UAE’s economy has certain key features that supports its development such as its strategic location, large sovereign wealth funds, free zones and increased direct investment to name a few. • Furthermore, the UAE is adjusting to the new world of low oil prices by strengthening the medium-terms fiscal framework, which according to IMF will result in the UAE posting surplus by 2021 UAE Government Revenue and Expenditure UAE General government net lending/borrowing (AED Bn) Sources: International Monetary Fund, World Economic Outlook Database, October 2017

  4. MEP-Construction Project Costing Overview From planning to completion, the life-cycle cost of a project can be split as follows where MEP works fall under the Execution phase at 30% to 40%: Construction Phase Planning, study and design Execution Completion Architect/consultant fees 3% – 5% Civil works / Structural work 20% – 25% Hard costs Mechanical , Electrical and Plumbing (MEP) works 30% - 40% Finishing works 35% - 50% Soft costs Sources: Ventures Middle East Research and Analysis

  5. UAE Construction Market Overview The UAE construction market had a period of growth from 2012 to 2016 following the global financial crises, Ventures ONSITE forecasts the UAE market to remain within the USD 50Bn mark in terms of projects awards over the forecast period with Dubai dominating the market and Building projects accounting for more than 50%. UAE Contract Awards 2010-2022 (USD Bn) UAE Contract Awards 2010-2022 (USD Bn), By Industry 2010-2017 2010-2017 2018+ 2018+ Sources: Ventures ONSITE, Ventures Middle East Analysis

  6. UAE MEP Market Overview-Q1 2018 The MEP sector of the UAE construction industry will be buoyed by investment in tourism and hospitality development, according to industry executives. The UAE MEP contractor awarded projects valued at for Q1 2018 was worth USD 8,404 Mn . UAE MEP Contractor Awarded Projects Valued at Q1 2018 Breakdown by Months (USD Mn and %) Top MEP Contractors for Q1 2018 Top projects awarded to MEP Contractors in Q1 2018 Sources: Ventures ONSITE, Ventures Middle East Analysis

  7. UAE MEP Market Overview-Major MEP Contracts expected to be awarded in Q2, 2018 Some of the major projects in which an MEP contractor is expected to be awarded in the 2nd quarter of 2018 are listed below: Sources: Ventures ONSITE, Ventures Middle East Analysis

  8. Conclusion • Expo 2020 is contributing great developments and projects that consists of a high volume of MEP work • Challenges in any MEP contracting business includes payment issues and stiff commercial competition with less capable contractors • MEP consultants are working more on the use of environmentally favourable products and reducing the impact of the building on the environment. MEP Engineers in the UAE have already started designing near zero and even zero energy buildings • MEP consultants in Dubai will be able to utilisethe projected thermal maps and emission footprints for a project to come up with the most optimum building design in compliance with the Al SA’FAT regulations, according to industry experts Note: Images are procured from various sources

  9. Thank you We will be glad to hear your comments and feedback on our board level report on UAE MEP Market (Quarter 1). It will help us to improve our 2nd quarter report.

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