Abu Dhabi has laid down an ambitious 2030 vision plan that will see its economy shift toward less reliance on oil. Part of that plan is developing its residential, tourism and health sectors with a focus on infrastructure.

01 September 2014

ABU DHABI’S construction sector continues to be driven by public sector investments with the major focus being on developing the emirate’s infrastructure. In addition, the emirate has been making concerted efforts to diversify its economy away from its dependence on oil, and these initiatives are slowly but surely bearing fruit.

Abu Dhabi is expanding its non-hydrocarbon sector and diversifying its economy as part of its 2030 vision.

Key projects that have been an important source of business for the sector are the expansion of Abu Dhabi International Airport – primarily the showpiece Midfield Terminal Complex – the museums on Saadiyat Island, the Etihad Railway, development of the emirate’s islands such as Saadiyat, Al Maryah and Yas, and housing and tourism projects.

According to a report quoting Chris Seymour, partner and UAE head of property and social infrastructure at the specialist consultancy EC Harris, Abu Dhabi’s construction sector has been “stable” through the first two quarters of this year, but a “growing pipeline of projects may increase spend in the latter half of 2014 and early 2015”.

Leading Middle East real estate consultancy Cluttons states that Abu Dhabi’s economy maintained its strength in 2013, but also showed significant signs of change.

The non-oil sector continued to expand its share of the economy in 2013, accounting for 45 per cent of total GDP (gross domestic product), up from 43 per cent during 2012. Of this, construction and building related activity accounted for around 9.1 per cent.

This gradual evolution in the economy is helping Abu Dhabi realise its ambition of sustainable and diversified growth.

This, in turn, has given impetus to the residential market. “The upside for the residential market will, of course, be a broad and varied source of buyer and tenant demand, which in the long run, will benefit the emirate’s rapidly growing freehold residential sector,” said Cluttons in a report on the residential market released in April this year.

According to a recent report by leading real estate investment and advisory firm JLL on the Abu Dhabi real estate market, the total residential stock in the emirate is now around 240,000 units after 1,750 units were completed in Reem Island, Danet Abu Dhabi and Al Reef during the second quarter.

In the medium term, the prospects for the emirate look good. According to a forecast by Abu Dhabi’s Department of Economic Development for the period between 2014-17, the emirate’s economy is expected to grow at 6.7 per cent as oil production rises and the government spearheads its five-year growth plans to diversify its economy. Although this figure is slightly lower than last year’s 7.4 per cent, it is in line with the multi-decade Abu Dhabi Vision 2030, Shorooq Al Za’abi, head of development indicators at the department, was quoted as saying in a newspaper report.

The five-year growth plans, which are expected to cost Dh330 billion ($89.8 billion), also entail the construction of more than 12,500 houses as well as schools, roads and other infrastructure, according to the emirate’s Executive Council.

With confidence having returned to the market, a number of projects have been launched or announced by developers this year.

In January, Arabtec Holding was awarded a Dh2.59-billion ($706 million) contract for a mixed-use development on Abu Dhabi’s Al Reem Island. The contract, awarded to its subsidiary Arabtec Construction, involves the construction of a residential tower and a five-star hotel. The project will be completed in three years.

Real Estate developer Aldar Properties launched three major residential developments valued at around Dh5 billion ($1.36 billion). Construction work on these developments is scheduled to begin in 2015. The projects include the Ansam development – the first phase of which comprises 540 apartment units – which will overlook the Yas Links golf course on Yas Island, and is set for completion in three years.

The second project is Al Hadeel development on Al Raha Beach Waterfront, with 230 apartment and townhouse units while the third development is located on Nareel Island where Aldar will develop land plots for 143 villas where UAE nationals can build their homes. The island is close to Al Bateen area of Abu Dhabi.

Meanwhile, Aldar’s prestigious retail development latest project on Yas island – the Yas Mall, is set to open in November. With the completion of Yas Mall, Aldar will become the largest owner and manager of retail space in Abu Dhabi.

Industrial development is also a key aspect in Abu Dhabi’s diversification plans with the current focus being on 10 sectors, including aerospace, renewable energy, semiconductors, steel, aluminium, engineered metal products, petrochemicals and plastics products. Abu Dhabi’s industrial zones, including the Khalifa Industrial Zone Abu Dhabi support this strategy. Mubadala is also helping broaden the emirate’s economy, with investment in the aerospace and high-tech manufacturing sectors.

 

Infrastructure

Abu Dhabi has accorded high priority to its infrastructure sector with new roads and railways and strengthened port facilities in the works. More than Dh50 billion ($13.6 billion) is being invested on railways including a 131-km metro system costing Dh11 billion ($3 billion) and Etihad Rail’s Dh40-billion plan to connect the emirate with Dubai and the Northern Emirates as well as the country’s major ports through 1,200 km of rail track.

The emirate is also developing its aviation infrastructure with the expansion of Abu Dhabi International Airport. These plans include the construction of the new Dh10.8-billion ($2.94 billion) Midfield Terminal Complex, work on which is well under way and set to be completed by 2017 (see separate article).

Meanwhile, work continues on the $7-billion Khalifa Port, which will be able to handle 15 million TEUs and 35 million tonnes of general cargo per year when complete in 2030.

Earlier this year, the Abu Dhabi Executive Council approved infrastructure projects worth Dh37.3 billion ($10.1 billion) covering sectors such as roads, electricity networks, water drainage and sewerage systems and housing complexes.

The projects, which are currently being implemented, are part of the five-year allocations of Dh330 billion ($89.8 billion) that were approved earlier by the council.

This year’s allocations include Dh12.7 billion ($3.4 billion) for housing and social facilities, Dh11.9 billion ($3.2 billion) for government management, Dh3.1 billion ($843 million) for economic affairs, Dh2.5 billion ($680 million) for healthcare projects and Dh2.4 billion ($653 million) for the education sector, according to a newspaper report.

The housing project includes 348 housing units worth $173 million in Al Shuaib and 186 housing units worth $90 million in Al Shuwaib.

Infrastructure projects include a 112-km-long road costing $140 million in the eastern region of Abu Dhabi, and a 20-km road worth $64.5 million in Mohammad Bin Zayed City.

A number of other projects are being developed in the roads sector, some of the major ones being two new roads costing Dh7.42 billion ($2 billion) that will boost connectivity to Dubai and the Northern Emirates as well as to the rest of the GCC.

Meanwhile, Belgian contractor Six Construct is constructing four new bridges to connect Abu Dhabi’s new financial district on Al Maryah Island with Reem Island and the Tourist Club area.

The project, according to Mubadala Development company, is worth Dh330 million ($89.8 million) and is expected to be completed in 2016.

The new bridges – 3, 4, 10 and 11 – will link Al Maryah Island with Hamdan Street and Electra Street on Abu Dhabi island to the west and with Reem Island to the east. According to the masterplan, two of the new bridges, 10 and 4, will eventually carry Abu Dhabi’s planned light railway system.

Architect Broadway Malyan’s plans for the island – drawn up before the global financial crisis – show that eventually the new financial centre – where the Abu Dhabi Global Market will be built – will be linked to the rest of the capital via 13 bridges connecting the island with Abu Dhabi island and Reem island via a series of thoroughfares.

Al Maryah, one of the major islands being developed by Abu Dhabi, is currently connected to the rest of Abu Dhabi by three bridges. One lies next to Abu Dhabi Mall, a second links with Reem Island, and the third is a service bridge that is now closed to ordinary traffic.

 

Al Maryah Island

Earlier this year, a Taiwanese developer, Farglory, launched its $1-billion waterfront Maryah Plaza project on Al Maryah Island. The project comprises three residential towers and one mixed-use tower with serviced apartments, a hotel, offices and retail space.

The first tower in Sowwah Square comprising 144 one, two and three-bedroom apartments and penthouses is expected to be ready by June 2017, with the entire project to be completed by 2020 in time for Expo 2020.

Meanwhile, Al Futtaim Carillion is working on Al Maryah’s second hotel, the Four Seasons, which is scheduled to open in 2016. The 34-storey 100,000-sq-m five-star property will comprise 190 guest rooms and 125 apartments.

The development marks the next significant phase of Mubadala’s Dh4 billion ($1.1 billion) Sowwah Square project on Al Maryah that the state-owned strategic investment company has been developing for the past six years.

 

Saadiyat Island

Saadiyat Island development is one of the biggest projects under way in Abu Dhabi and will be home to prestigious developments such as a New York University campus, a $1.3-billion Jean Nouvel-designed Abu Dhabi Louvre and the Frank Gehry-designed Guggenheim. Close by will be the British Museum and Zayed National Museum designed by Norman Foster. Surrounding these will be five-star hotels and hundreds of luxury villas and apartments.

Significant progress has been made on the Louvre, which is expected to be completed next year. The Zayed National Museum is expected to see completion in 2016, with the Guggenheim the following year.

Work is well under way on a 1.2-km-long service tunnel that will connect all the museums in the Saadiyat Cultural District.

Abu Dhabi’s government-owned Tourism Development and Investment Company (TDIC), the master developer of Saadiyat Island, recently announced that it was looking for a main contractor to build nine new multi-storey residential buildings on three plots with a total area of 61,000 sq m. Early stage works for the substructure (including shoring and piling) are being awarded under a separate contract.

Meanwhile, Cranleigh Abu Dhabi, a leading school campus on Saadiyat, is scheduled to open this month, according to TDIC. Finishing touches are being put to three main buildings – a junior school, a science building and an indoor sports centre.

TDIC also said that the third phase of its Saadiyat Beach Villas, which are currently under construction, will be completed on schedule by July 2015. The third phase adds 77 new villas, bringing the total on the island to 428.

Saadiyat Island will also be home to a Dh860-million ($234 million) resort which is being built by the contractor Ghantoot Group and engineering company Sheikh Suroor Projects Department. The Saadiyat Island Beach Resort complex, which is expected to be ready by the end of 2017, will comprise a low-rise 295-room hotel and 11 luxury villas, along with meeting rooms and a spa.

The new property, to be locally managed, is among a number of hotels being hosted by the 27-sq km island. Its first, Abu Dhabi National Hotels’ Park Hyatt, opened in 2011 with a 306-room property. It was followed by TDIC’s 377-room St Regis, along with 32 villas.

Under development is the delayed 354-room Saadiyat Rotana Resort, and a 366-room Hilton both of which are expected to open next year to coincide with the completion of the Louvre. The 366-room Hilton Abu Dhabi Saadiyat Island Resort, owned by Bin Otaiba Investment Group, is expected to cost Dh800 million ($217.8 million) and spreads over 91,000 sq m.

A 208-room Shangri-La is also being built at Saadiyat by the Dubai contractor Al Jaber group.

 

Hotels

These developments are part of Abu Dhabi’s plans to boosting its tourism infrastructure which is seeing the development of several hotels and malls.

The 677-room Millennium Bab Al Qasr will be one of the largest hotels in the city when it opens near the Corniche in the second quarter of next year. Millennium and Copthorne Hotels Middle East and Africa also plans an additional 218 rooms as part of the upscale Biltmore Bateen Marina Abu Dhabi in 2016.

InterContinental Hotels Group announced that it would manage two hotels in the capital, including a 184-room waterfront property. The InterContinental Abu Dhabi-Grand Marina is expected to open in 2016 beside the existing InterContinental.

In addition, the emirate has been exploring the tourism potential of Sir Baniyas Island and Al Gharbia, with the Tourism and Culture Authority of Abu Dhabi now upgrading the status of the Sir Baniyas Island airport and looking to add cruise stops in two years to accommodate the rising demand from tourists.

The National Corporation for Tourism and Hotels (NCTH), which manages the four-star Tilal Liwa Hotel and Danat Jebel Dhanna Resort, is investing Dh100 million ($27.2 million) in a 110-room property in the region.

Among other developments, Al Dhabi Contracting Company is working on a Dh500-million ($136 million) property in Ruwais called The Ridge, which is shaped like a sand dune. It would have 200 rooms and 35 chalets along the coast.

Another called Al Dhafra Inn will add 120 rooms and 20 chalets in Madinat Zayed City, and is expected in the next two years.

Abu Dhabi is expected to add 778,000 sq m of retail space over the next three years, according to a study conducted by property adviser CBRE.

The study also says that a total of 39 million sq m of shopping centre retail space is currently under construction in the world’s biggest cities, with Abu Dhabi having more retail space under development than anywhere in the Gulf.

Perhaps the most eagerly awaited of these developments is the Yas Mall in Yas Island, which is due to open in November this year. It will offer a range of leading international and regional retail and food and beverage (F&B) brands, a 20-screen state-of-the-art cinema operated by VOX Cinemas and a family entertainment zone by Funworks.

Among other major retail developments envisaged for the emirate is the Reem Mall, work on which is expected to begin at the start of 2015 and will take three years to complete. RTKL, the worldwide architecture, engineering, planning and creative services organisation, has recently begun design work on mall, following its appointment as the design consultant on the project by National Real Estate Company (NREC).

 

Hospitals

Fourteen new healthcare facilities are currently under construction in Abu Dhabi. These include the 719-bed New Al Ain Hospital project costing Dh4.3 billion ($1.17 billion) and Shaikh Khalifa Medical City expansion project which will see its capacity increase from 568 to 838 beds.

Private hospital groups such as DM Healthcare Group, NMC Health and Al Noor Hospital have turned their attention to building infrastructure over the past five years. South Africa’s Mediclinic International and Saudi German Hospital group are among the key international players that have shown interest in developing projects.

In addition, Burjeel Hospital is planning a $1.5-billion expansion in the emirate over the next three years. A part of VPS Healthcare Group, Burjeel plans to open four hospitals, five specialty centres and 10 medical centres, including one on Reem Island that it plans in the next 10 months.

Construction of Burjeel Medical City in Mohammed bin Zayed City will alone cost Dh1.4 billion ($381 million) and is expected to be ready in the next two years. When fully operational, it will have 400 beds, with oncology being one of its specialties.

The other three hospitals will be in Al Ain, the Western Region with Madinat Zayed high on the list of preferred locations there.

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