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July 11, 2024 foasummit0

As Saudi Arabia constructs a new economy, there’s no doubt that the country must reconfigure its construction and engineering market in order to deliver the extraordinary pipeline of major projects. Do we see signs of this essential transformation taking place? The answer is a categoric ‘yes’ – and, as evidence for this positive assessment, consider the significant legal reforms that have been enacted; the growing desire to embrace technology; a drive for sustainability; and the steady shift towards more equitable contractual agreements.

We’ve seen massive changes in the Kingdom during the past 13 years, and a marked shift over the last five. There has been recognition at the highest levels that radical change is essential if Vision 2030 and other major developments are to be delivered.

In reality, only Europe’s post-war reconstruction or China’s modernisation bear comparison to the scale of the Saudi plans. The timeline is also daunting. As well as delivering what must be the world’s largest transformation programme, there are the event-driven deadlines of the 2029 Asian Winter Games, 2030 World Expo and 2034 World Cup. Associated infrastructure, stadia and facilities must be built alongside giga-project cities still in their embryonic stages.

As Tim Whealey, Partner, HKA, comments: “The Kingdom has consistently strived for reform as it continues to implement its strategy to diversify from a hydrocarbon-based economy. What is truly impressive is not only the extent and scale of these reforms, but the pace at which the changes have been implemented and the way Kingdom has embraced deep change. All this highlights the Kingdom’s ambition and underlines the priority it places on the delivery of Vision 2030 (and the wholesale transformation of the Kingdom). Three notable reforms are:

  • The sweeping changes to the legal system (through the introduction of the Civil Transaction Law)
  • The creation of the SCCA to ensure that world-class ADR services are available in-Kingdom
  • The use of project procurement routes that actively seek to de-risk the project delivery process and capitalise on Contractors’ skills from a much earlier stage of a project.

“These, and the myriad other changes, have created a strong foundation for the ongoing roll-out of what must be the world’s largest transformation project; and they explicitly demonstrate the Kingdom’s commitment to its Vision.”

 Learning the lessons

Avoiding past conflicts and overruns will be crucial. Last year, HKA’s Sixth Annual CRUX Insight Report analysed more than 1,800 projects in 106 countries with a combined CAPEX of $2.247 trillion. CRUX showed that overruns in the Middle East were among the longest of the world’s regions, averaging 82% of planned schedules (and nearly 100% in Saudi Arabia). On average, the costs claimed on these 401 projects exceeded 35% of agreed budgets.

The most dominant causes of project claims and disputes were change in scope (54%), and the often-related problems of design information being issued late (34.9%) or incomplete (30.5%). Conflicts over contract interpretation (28.8%) and late approvals (27.1%) completed the other ‘top five’ causes.

What about in Saudi Arabia itself? Well, in the Kingdom, scope change (54%) and late designs (34.5%) again came top, with restricted or late access to sites (also 34.5%), followed by late approvals (31.9%) and cashflow and payment issues (23.6%).

Re-balancing risk                                  

While the risks of delay and cost overruns mount over the project lifecycle, the opportunities to minimise those risks are greatest in pre-construction – during inception, design and procurement. Risk allocation needs to be realistic and reasonable. In a super-heated market, there is a re-balancing of power and contractors are in a more equitable position. They can push back on onerous terms. So, we are beginning to see a more sensible view of risk sharing and changes in the way that employers and contractors are procuring, such as collaborative contracting and public-private partnerships (PPPs).

But changes in the market need to go further. There must be a push on ‘planning to succeed’, rather than simply repeating past mistakes. As well as ECI, this new delivery model should, for example, involve open-book accounting and incentivising target costs and key outcomes – with sharing of gains and pain alike. High performance must be encouraged and rewarded; it’s fundamental to achieving what’s most important to the client; and so is the shift towards ensuring that any claims are resolved before developing. A new, enlightened approach of this kind would, surely, be of benefit to all parties.

 Reforming the law

There are other positive trends, too, such as a greater investment in off-site prefabrication and a noticeably increasing commitment to ESG (environment, social and governance).

Notwithstanding, factors such as adversarial contracts, an opaque legal system and heavy losses sustained on past projects have made many contractors reluctant to enter the market. We see initiatives to rectify this in the new Civil Transaction Law, which promises fair dealings in contracts, while the Saudi Centre for Commercial Arbitration (SCCA) is a truly credible forum for administering international disputes. These are massive changes that can build confidence among foreign contractors.

There is still one harsh reality: given that the construction market is still in the early stages of transition, the ongoing capacity, supply chain and cost escalation risks will be colossal. But the opportunities created by Saudi Arabia’s epoch-making vision are hugely exciting – contributing to a national transformation that will embrace every sector from construction and power to transportation, tourism and housing.

The post Delivering Saudi’s transformation appeared first on Middle East Construction News.


Source: ME Construction News


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July 11, 2024 foasummit0

Since the launch of Saudi Arabia’s ‘Giga projects’ as part of its ‘Vision 2030’ economic diversification scheme, the kingdom has emerged as a key driver in the construction sector in the Middle East. In fact, 39% of the Middle East and Africa (MENA) project pipeline is in KSA, with activity forecast to experience 4% growth each year between 2024 and 2027. According to the Saudi Contractors Authority (SCA), the building and construction sector contributes 6% to GDP, making it the second-largest non-oil sector in the country.

While it presents unprecedented economic opportunities for KSA and the region, the high concentration of multiple colossal development projects, at various design and development stages, has strained the construction activities of the nation and neighbouring countries. This includes mature markets like the UAE, where the demand for talent and staff retention has intensified, and the supply chain pressures have increased. As a result, businesses must rethink their operating models and project delivery approach to remain competitive.

Talent acquisition and retention

Staff retention in the UAE has become a major challenge, due to the highly competitive salaries, benefits, and compensation packages offered to attract talent to Riyadh. According to the Ministry of Finance’s 2024 budget statement, the Kingdom of Saudi Arabia has created 1.12 million jobs in the private sector to meet project demand.

In the past, working in KSA was more niche: it traditionally attracted young, single individuals who were willing to earn a higher salary and gain experience working on some of the world’s most ambitious and exciting projects.

However, with the country’s rapid modernisation and social changes in recent years, cities like Riyadh and Jeddah are becoming more attractive to expats, with shopping malls, restaurants, parks, sports facilities, and recreational amenities; they are attracing an increasing volume of talented and experienced indivduals, who now feel happy to relocate their families.

Developers and contractors in Saudi are also placing increased pressure on staff to live in the Kingdom, thereby reducing the opportunities for staff to base themselves in the UAE and commute to KSA on a ‘fly in, fly out’ basis.

The increased attraction from KSA is creating challenges around the retention of  key staff, as well as inflating salary levels in Dubai and Abu Dhabi. Companies need a new approach to talent acquisition, rewards and performance to retain their business advantage. For years, companies in the region have been vying for the same limited pool of qualified professionals. However, in the Middle East, there exists an incredibly diverse population in terms of nationality, race, ethnicity, age, and experience, which represents a significant untapped talent pool. Unfortunately, this potential is often overlooked due to gender, racial or age stereotyping stemming from deeply ingrained cultural norms and societal expectations.

Moreover, implementing transparency and merit-based compensation packages and fostering an inclusive work environment that prioritises employee satisfaction can significantly contribute to talent retention. Companies can make investments in training and development to upskill their workforce and enhance employee engagement.

Mitigating supply chain pressures

Pressure on the global supply chain has been an  issue since the COVID-19 pandemic and has been prolonged by recent cross-border conflicts in the Eastern and Middle East regions. As a result, there have been delays caused by the closure of trade routes, a surge in demand for locally sourced products, and escalating prices.

The increasing demand for construction materials for Saudi Arabia’s giga-projects has further intensified competition, raised prices, and extended project timelines in the UAE. These demand and supply challenges, coupled with ambitious project schedules across the region, have led to resource scarcity and rationing.

However, it is important to note that this situation is likely temporary, and efforts are being made to streamline the supply of locally sourced materials within Saudi Arabia through prefabrication and modular construction. In the meantime, many materials initially allocated for the UAE are being redirected to the larger projects in Saudi Arabia.

To reduce the impact of supply chain disruptions, companies must get around what’s traditionally been their way of approaching supply chain and manufacturing. Apart from diversifying suppliers and developing contingency plans, technology adoption for real-time tracking of shipments and inventory levels can provide insights to anticipate and mitigate disruptions.

Consider repurposing or recycling existing and surplus construction materials to reduce the strain on natural resources and decrease the industry’s reliance on raw materials procurement, while simultaneously fostering a more eco-friendly and resilient sector. Rather than disposing of used or excess materials in landfills, the establishment of green building material exchanges enables construction companies to engage in buying, selling, or donating these materials. This approach not only extends the lifespan of materials but also promotes the circular economy, encouraging resource conservation and minimising waste. By embracing these practices, the construction industry can also make significant strides towards a more sustainable future.

Greener and more human-centric developments

The implications of these cost increases in the construction sector resulting from increase in labour and material costs presents a unique opportunity for innovation and differentiation. Developers are staying ahead by integrating cost-saving measures and sustainable practices into their projects to attract a new segment of investors and buyers.

This includes repurposing ageing or underperforming buildings and focusing on creating sustainable, inclusive communities with a focus on wellness. These initiatives are driven by an emphasis on improving residents’ overall quality of life.

By reusing existing structures, developers can preserve architectural heritage and reduce reliance on new construction, benefiting both the environment and their bottom line while increasing speed to market.

Additionally, community developments prioritise connectivity, featuring walkable neighbourhoods that promote social interaction and provide easy access to amenities. These developments are designed to cater to changing lifestyle preferences and are expected to have high demand and long-term sustainability.

Conclusion

While Saudi Arabia is expected to maintain its influence on the region’s construction activities, the UAE market remains immensely appealing to real estate investors and individuals choosing the UAE as their permanent residence. Accodring to JLL’s UAE Construction Market Intelligence Q1 2024 report, the UAE stands out with a high-value pipeline of USD590 billion in the Middle East and North Africa’s projects market, with residential projects accounting for USD125 billion (21%), and mixed-use projects representing USD232 billion (39%).

The post The ripple effect of Saudi Arabia’s construction boom appeared first on Middle East Construction News.


Source: ME Construction News


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July 10, 2024 foasummit0

DUBAL Holding has announced a stake acquisition in BiOD which it claims will propel the UAE’s position in the global green economy, “reinforcing both companies’ dedication to environmental sustainability and innovation in the energy sector.”

BiOD, is the UAE’s and the GCC’s largest biodiesel manufacturer, is renowned for its pioneering work in transforming used cooking oils (UCO) and palm oil mill effluent (POME) into clean biodiesel.

As the operator of the GCC region’s only second-generation biodiesel plant, BiOD stands at the forefront of technological innovation in renewable energy, showcasing its commitment to the circular economy and reducing greenhouse gas emissions by 84 per cent, as verified by its ISCC certification.

DUBAL Holding, a sovereign wealth fund with a focus on sustainable and green investments, recognizes the strategic importance of BiOD’s mission and operations. This investment underscores DUBAL Holding’s commitment to fostering a sustainable future and supports Dubai’s vision for a green economy.

“This partnership with BiOD aligns perfectly with DUBAL Holding’s strategic objectives of investing in environmentally responsible and innovative businesses. We are confident that this collaboration will not only contribute to sustainable development in the UAE but also set a precedent for environmental responsibility worldwide,” said Ahmad bin Fahad, CEO of DUBAL Holding.

Echoing this sentiment, BiOD’s CEO, Shiva Vig, expressed profound gratitude and optimism about the future.

“We are thrilled to welcome DUBAL Holding as a strategic partner. This is not just an investment in our company but a testament to our shared vision for a sustainable future. We are proud to contribute to the UAE’s green economy and look forward to making even greater strides in renewable energy with DUBAL Holding’s support. I also want to acknowledge our advisors at Ideal Capital for their crucial role in facilitating this deal,” Vig stated.

 

The post DUBAL Holding takes equity stake in BioD Technology appeared first on Middle East Construction News.


Source: ME Construction News


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July 10, 2024 foasummit0

c, a leading global business conglomerate and master developer behind The Heart of Europe, has launched the Marbella Resort Hotel, Vignette Collection by IHG Hotels and Resorts, on the World Islands, Dubai.

The AED 1 billion five-star hotel draws inspiration from the architectural marvels of the Spanish resort town of Marbella, and is poised to bring the complete Costa Del Sol experience to the UAE with its distinct Andalusian-inspired design.

The hotel is surrounded by half a million square metres of 9 different types of coral reefs that house over 30 types of fish. The kilometre long raining street winds around the hotel, bringing a cooling downpour on the streets every few minutes.

Guests can experience authentic European cuisines at one its 6 restaurants: Descanso, its signature restaurant that offers Live cooking stations, Live entertainment and signature sangrias; Casa Bougainville, that offers small, somewhat delicate appearing tapas that burst with flavours and texture; The Citrus Gem with its unique café experience, offers its guests a selection of light bites, pastries, and authentic Spanish coffee; Arenda Dorada, meaning ‘beautiful sand’ is the hotel’s beach and pool restaurant that transports guests back to the idyllic beach clubs of Marbella; the Challet Sierra, hotel’s Après ski bar is further enhanced by the Snow Plaza experience, adding an extra layer of excitement and authenticity to the après-ski ambiance.

Crowning the gastronomic possibilities, is the Carmen Amaya Bodega bar, named after the famous Spanish Flamenco dancer. This venue is intended to be a hidden gem offering a unique experience as a destination for wine, cheese, and bites, in which the passion behind the Flamenco comes to life and immerses the guests into a true and authentic Spanish Bodega Bar experience. For its guests seeking wellness time out, the hotel also brings an authentic hammam experience at The Arabian spa. There is solace to be found in its cave-like architectural style and a menu of multiple massage treatments.

The property will feature various pricing options, catering to diverse preferences and requirements. Investors into the project will find it highly rewarding as well, with assured and guaranteed returns on investment of 8.33% per annum, for 12 years. With only limited units being released, and the prices on The World Islands on a continuous upward trajectory, this opportunity is likely to be extremely popular with investors from UAE and overseas markets alike.

Josef Kleindienst, Chairman of Kleindienst Group, expressed his enthusiasm about the launch, stating: “We could not be prouder of this new project. The Marbella Resort Hotel, Vignette Collection is a testament to our commitment of delivering exceptional experiences that are also true to our commitment

to sustainability. We envisioned a destination that provides a unique cultural escape with experiences that are authentically Spanish, right here in Dubai. We have been conscious of our commitment to making our projects environment friendly, with employment of solar power and adoption of policies aimed at zero discharge of microplastics. This is just the beginning of our journey to redefine regional hospitality standards.”

The 150-key luxury hotel, will be IHG Hotels and Resorts’ first Vignette Collection on the World Islands, and is set to bring Spanish living with its gardens that provide an oasis of calm for daily meditation, sunken courtyards, citrus and olive groves and the Après Ski bar that bring alive the magic of Andalusia. Guests at The Marbella Resort Hotel will have the option of choosing from any of the suites, chalets or cabanas that face the sea, the snow plaza or the famous raining street.

Guests can experience a distinctive boutique retreat, where beach parties, water sports, open-air sea-breeze restaurants, pristine beaches, mesmerising sunsets, vibrant coral reefs, exhilarating diving adventures, and authentic culinary delights converge seamlessly with signature spa offerings for a truly unforgettable Spanish escape.

Marbella Resort Hotel, Vignette Collection, will have the distinction of being the first hotel with private coral reefs for its guests, allowing them to explore the stunning underwater world in a truly immersive manner. Visitors will also experience snorkelling and diving. These reefs will attract diverse marine species, including angelfish, anemonefish, lionfish, and green turtles, as part of the broader coral reef master plan for The Heart of Europe.

The post Kleindienst Group launches 1bn dirhams Marbella Resort Hotel appeared first on Middle East Construction News.


Source: ME Construction News


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July 10, 2024 foasummit0

With demand for both off-plan and ready properties in Dubai at an all-time high, developers are locked in an intense battle to win over real estate investors.

Firas Al Msaddi, CEO of fäm Properties, says more options for buyers in a maturing market means that developers are battling on several fronts to get their attention.

“The abundant supply of residential property is influencing buyers and investors to become more selective when choosing a project, and even an individual unit,” says Al Msaddi.

“This is one of the signs of a maturing market. As a result, the competition between real estate developers is intensifying, and several vital competitive metrics decide who stands out.

“One key is the overall value of each offering, including lifestyle and living experience, location, finishing and overall quality, supported by the developer’s brand and reputation.

“Meanwhile, with property values at an all-time high, the total ticket price per unit is becoming more significant than price per square foot. Payment plans are particularly crucial in the current environment of high borrowing costs.”

Soaring Dubai property demand was highlighted by a record AED124.4bn of transactions in Q2 2024. Meanwhile, growth in supply continues, with 59,000 units registered by developers so far this year, following last year’s total of 101,000, double the figure for 2023.

“While the off-plan property market remains robust, not all developers fully capitalise,” says Al Msaddi. “Projects that stand out have unique selling points – like Verve City Walk, which recently sold 427 units in 45 minutes, with the penthouse fetching AED30 million.”

“The best sales stories come from developers like Meraas devoting time and resources to know the market inside-out, planning carefully, and having experienced brokers on their team.”

Developers, regardless of their size, are also competing for the attention of real estate agents, who account for most sales, and can benefit by avoiding the fast track to commission.

“Smart agents understand that selling the right property to investors to give them the best returns brings continued business and referrals,” says Al Msaddi. “Agents who prioritize higher commissions for themselves over project profitability often miss out in the long run.”

The post Developers locked in battle to win over Dubai investors appeared first on Middle East Construction News.


Source: ME Construction News