real estate

Infrastructure to drive recovery in Mideast construction sector: Survey

February 8, 2021

The construction activity in the Middle East was broadly flat in the last quarter of 2020, but there are clear signs of growth in areas such as information and communications technologies (ICT) and energy infrastructure, according to the latest survey conducted by RICS Global Construction Monitor.

The RICS Construction Activity Index for the Middle East, a measure of current and expected construction market conditions among construction professionals, was at -10 per cent in the fourth quarter of 2020, up from -11 per cent in the third quarter and -40 per cent in the second quarter.

‘This indicates that whilst activity was broadly flat, this is an improvement on the negative trends reported back in the second quarter. Moreover, looking at a sector level reveals some areas of strength in terms of infrastructure activity,’ RICS said in a press statement.

As per RICS, financial constraints continued to hold back activity in the last quarter of 2020, with 89 per cent of respondents reporting this as an issue. Cost of materials and insufficient demand are also the main factors holding back activity.

It said professionals believe infrastructure will be at the forefront of the wider recovery of the sector over the next twelve months. ‘Professionals in the Middle East also expect workloads in private residential and private non-residential to rise over the coming twelve months. Looking at the headcount and profit margins, whilst a net balance of 7 per cent of respondents expect to see a rise in headcount over the course of 2021, 6 per cent of respondents expect profit margins to fall.’

Sean Ellison, senior economist at RICS, said, “The building blocks for recovery are being put into place, with construction activity growing once more on the back of concerted infrastructure investment and rising optimism. Despite the early signs of recovery challenges remain. Whilst construction will play a vital role in wider global economic recovery, the sector’s recovery is not yet entrenched – nor is it universal across countries.”

“With infrastructure a key driver in leading this bounce back, greater government spending will be vital. Many governments have committed to substantial infrastructure spending, bringing forward shovel-ready projects and we can expect more fiscal stimulus. How effectively this capital is put to use will dictate the speed of our recovery,” Ellison added.

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