JLL Real Estate indicated, in its latest report on the performance of the construction market in the UAE during the first quarter of 2024, that despite the continuation of global challenges such as persistent inflation, high interest rates, and geopolitical tensions, the total value of construction projects that were not completed is expected to reach… In the Middle East and North Africa region, it is awarded to $3.9 trillion, noting that the UAE owns a large share of it, at 15%.
The report, which was based on information collected from market sources and construction sector experts, revealed that the UAE is characterized by projects with a high value amounting to $590 billion in the project market, with residential projects accounting for about $125 billion (21%), while mixed-use projects represent $232 billion (39%).
Important position
Given its position in the UAE real estate market, Dubai witnessed a significant increase of 21% year-on-year in sales and rental prices, with about 10,000 residential units delivered in the first quarter of 2024.
About 25,000 units are scheduled to be delivered by the end of the year, bringing the total housing stock in Dubai to about 754,000 units.
In Abu Dhabi, about 1,600 units were delivered during the first quarter, and an additional 6,000 units are expected during the remainder of 2024. The capital recorded moderate annual increases of 5% in sales prices and 2% in rental prices, respectively, and is expected to witness a rise. Its total inventory reached 294 thousand units this year.
In the hospitality sector, Dubai saw the addition of 2,000 hotel rooms to its existing inventory in the first quarter of 2024, with the focus mainly on the 5-star category. With an additional 5,000 rooms expected to be added in 2024, the total hotel rooms in Dubai will reach 160,000, while Abu Dhabi will add about 500 rooms this year, bringing its stock to 34,000 hotel rooms.
Positive outlook
JLL maintains a positive future outlook for the UAE, which achieved remarkable achievement in 2023 and nearly tripled the value of projects awarded, compared to the previous year.
According to “MEED Projects” magazine, which tracks and monitors regional projects, the value of these projects reached $87 billion, compared to $31 billion in 2022, which reflects the distinguished progress made by the country in line with its endeavors to achieve its goals in economic diversification and investment.
Strong flexibility
Laura Morgan, Head of Market Intelligence for the Middle East and Africa at JLL, said: “Based on the strong resilience and promising growth prospects enjoyed by all sectors in the UAE, the construction market is showing a steady upward trend. Last year 2023, in light of the prosperous market conditions, the sector contributed $42.9 billion, which represents about half of the total projects awarded. Although the upward trajectory of land and construction costs remains a major challenge in 2024, the strong demand for new projects will ease the pressure and maintain the sector’s growth momentum during the year.”
Inflation
Taking into account the significant increase in construction prices, the prevailing market conditions, the expected value of projects, and external factors that may affect construction prices, JLL’s forecasts indicate that the UAE is expected to witness tender price inflation of 3% in 2017. 2024. The report also revealed that to overcome rising costs, developers in Dubai may resort to exploring the possibility of developing smaller units and projects in secondary areas.
The report stated that price fluctuations in shipping and transportation greatly affect local construction prices due to increased reliance on imported materials such as glass, facade systems and timber.
From March 2023 to March 2024, freight shipping rates witnessed a significant increase, with the Drury Global Container Index rising from $1,800 per 40-foot container to more than $3,000.
However, the analysis indicates that the availability of construction materials is currently stable and that the medium to long-term outlook indicates improvements in local manufacturing capabilities. The World Steel Association expects global steel production to grow by 1.9% in 2024 after a 1.6% decline the previous year. The JLL report also indicates that demand for steel in the Middle East and North Africa region is expected to rebound in 2024, supported by mega projects and the residential sector.
