- Recovery continues in Q1 with data signalling expansion in all regions
- Infrastructure key driver of improving tone followed by private residential development
- Rising material costs likely to hamper profit margins over coming year
Infrastructure workloads across the Middle East and Africa have increased for the first time since the pandemic hit, according to the latest RICS Global Construction and Infrastructure Monitor.
As countries across the region start to come out of lockdowns, the latest survey shows that infrastructure will lead the region’s construction recovery, as a net balance of +15% reported an increase in current workloads, and +45% more respondents expect infrastructure workloads to rise over the coming twelve months.
Following over a year with many working from home, it’s unsurprising that respondents to the survey point to a greater increase in ICT infrastructure, +34% in Q1 2021 and up from +14% in Q4 2020. Societies ambition to build back better is also reflected by an increase in workloads in agri-business and water.
Elsewhere, workloads across private residential and private non-residential are still falling, but to a lesser degree than in previous quarters with -12% and -23% of respondents, respectively, reporting a fall in activity (Q4 2020 net balances: -34% and -41%)
Looking at activity in each country, Saudi Arabia (STAT) saw solid growth in construction activity over the previous quarter, but Oman (STAT) and the UAE (STAT) saw a fall in overall construction workloads.
Despite numerous factors holding back activity at present, financial constraints continues to be the biggest impediment to growth, with 89% of respondents reporting this as an issue. Alongside this, over two-thirds of respondents feel material costs and a lack of demand are also impacting activity.
With the subdued current activity, employment levels fell, albeit to a lesser degree, for the fourth consecutive quarter. However, despite the subdued opportunities at present, respondents are more optimistic for the year ahead as 12% more anticipate an increase in headcount. Also looking ahead, respondents expect workloads across all sectors to increase over the next twelve months, however, profit margins remain flat.
Sean Ellison, RICS Senior Economist, commented on the global survey:
“Feedback from Chartered Surveyors indicate that the recovery in global construction markets is gaining momentum, propelled by work on infrastructure projects in Asia Pacific and residential projects in Europe (and to a lesser degree the Americas). With few exceptions, RICS professionals in most global markets expect a pickup in construction market activity across all segments of the market over the next year.
“However, the recovery is not without its challenges. Increasingly respondents are pointing out difficulty in sourcing materials amid supply chain bottlenecks, which appear to have resulted in the cost of materials pushing up overall construction costs. In markets that rely on migrant labour, the persistent restrictions on mobility have led to a shortage of labour. As a result, construction costs are expected to rise twice as much as tender prices over the next twelve months, which will undoubtedly put margin pressure on construction firms.”
-Ends-
Comments from contributors:
Bahrain
Shortage of material supplies -Manama
Over supply of residential property has reduced demand from that sector - Manama
Kuwait
Government Strict measures implemented due to COVID-19 - Ahmadi
Oman
Paucity of funds both for project sponsors and contractors - Muscat
A major factor affecting all involved in construction including consultants is delay in payments - Muscat
Qatar
Shortage of resources at all levels.- Doha
Confidence should be boosted now the embargo has been lifted, but there are no noticeable signs yet - Doha
Inadequate levels of skilled labour because of movement restrictions - Doha
Saudi Arabia
The shortage of professional and skilled workers is the main factor affecting the construction - Riyadh
Travel restrictions are affecting construction works - Riyadh
The cost of materials, working permits, skilled professionals, and increasing of taxes in all region - Riyadh
UAE
Due to restrictions on free movement from Dubai to Abu Dhabi, local firms are increasing their rates - Abu Dhabi
Bigger developers have taken a break from new developments. They need to come back with new projects - Dubai
More contractors competing for a smaller amount of work - Dubai
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