What were the key conclusions from this year’s CityScape Dubai, held in September?

Building for the future

While the mega-project launches got the headlines at the recent CityScape Dubai, there were some important insights for SMEs involved (whether directly or indirectly) in the sector.

The overall conclusion? A note of caution needs to be struck against the tendency for an event like CityScape to be unswervingly upbeat.

While many of the analysts’ predictions released around the time of the event remained bullish, this is partially the result of a focus on large-scale factors – Expo 2020, continued economic diversification as government policy, the relentless rise in tourism numbers – as drivers of the sector.

However a sense of adjustment was apparent at the more micro-levels that SMEs generally operate in. For example: a 10% year-on-year drop in luxury residential prices in Q3; a decreasing number of transactions at Dubai Land Department; the temporary ‘mothballing’ of some projects… as most construction SMEs tend to be engaged in live projects, these events are being keenly felt – even when the overall sector has positives to communicate.

Some commentators, such as Alpen Capital, for example, shared this idea of a balanced outlook being the order of the day. They’ve identified a number of opportunities and challenges that we’ve then assessed for relevance to SMEs.

Opportunities

Affordable housing. It’s now deliberate policy by several GCC governments, including the UAE, to encourage developers to bridge the yawning supply and demand gap for housing units for mid-income groups. This initiative could well be relatively resilient to any overall downturn, and indeed may be the area of focus should luxury residential construction diminish. SMEs whose product and service offerings target this market opportunity should be in a good place.

Pre-cast housing systems. Across the region, pre-cast concrete systems are increasingly preferred for housing projects such as low-rise residential buildings. They’re highly durable, low on cost, and environment-friendly. Pre-cast concrete is also driving creativity, as architects now have greater ability to develop intricate designs that can easily be produced off-site. If you’re an SME in this market – good. If you’re able to position yourself as the ideal partner for architects – even better.

Joint ventures with international companies. Many international companies are entering the region through partnerships or joint ventures. SMEs that are open to working in this way are well-positioned to take advantage. Those that are proactively pursuing it – whether through marketing, networking or other methods – are a step even further ahead.

Challenges

Talent. Companies in this sector often depend on expatriate staff, and the challenges of hiring and retaining them never goes away. If the wider economy continues to be affected by the ongoing low oil price, this issue could be even more keenly felt.

Potential raw material shortages. Over the past few years, rapid expansion of GCC construction activity has put pressure on the supply of raw materials, particularly cement. In addition, tough regulations on imports (coupled with logistical challenges) have pushed raw material prices up in the GCC. This trend could put pressure on margins for SMEs.

Increased competition. Whether there ends up being more projects (that therefore attract more players to the region), or fewer projects than expected, competition is expected to intensify. This will put further pressure on margins, and on SMEs to find unique and innovative offerings to own.

 

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