Commercial infrastructure will be the clear outperformer within the broader construction sector of the UAE in the coming years, as economic diversification gathers pace and the various emirates focus on developing higher-value service industries, a report said.

Twin factors will fuel the outperformance of the UAE's commercial building sector in the coming years, explained BMI Research, a Fitch Group company, in its Middle East and Africa Infrastructure Insight.

In the short term, Expo 2020 will drive commercial activity in Dubai, while over the long term, efforts to diversify revenue streams away from oil and into higher value add service and tourism industries will stimulate investment into commercial building projects, particularly in Abu Dhabi.

Expo 2020 driving short-term commercial boom

Commercial infrastructure growth will be continue to be centred upon Dubai in the short-term, largely due to ongoing construction activity associated with Expo 2020.Though BMI has long highlighted Expo 2020 as a key catalyst of higher levels of construction activity, the proliferation of investment pledges relating to the Expo has accelerated over the past year as the deadline nears, the report said.

In November 2017, for example, Cimolai Rimond Middle East, a joint venture between Cimolai and Rimond, secured a deal to construct Al Wasl Plaza in Dubai. The project is the final major design element of the Expo 2020 site, which will focus around a planned 438-hectare site, the largest ever created for a World Expo.

Located in Jebel Ali, construction at the site is expected to cost between $2 billion and $4 billion. The site will feature 180 purpose built pavilions, an underground service rail network and a photovoltaic solar power canopy capable of producing 50 per cent of the site's power. Work is expected to be completed for 2019.

Abu Dhabi ambitions to sustain longer-term growth

In the long term, BMI expects that investment in Abu Dhabi's commercial building sector will help offset an expected decline following the conclusion of Expo 2020.

BMI anticipates that Abu Dhabi's share of the pipeline will grow in the coming years as the government prioritises efforts to expand the emirate's economic base beyond oil.

Illustrating Abu Dhabi's ambitions in the commercial infrastructure space, its government aims to attract 7.9 million tourists annually by 2030 under the auspices of its Abu Dhabi 2030 Plan, up from 4.4 million in 2016. Furthermore, the emirate hopes to expand its retail and office space to 4 million and 7.5 million square metres by 2030, respectively, up from 2.5 million and 1.5 million in 2013.

“As such, we are seeing a number of big-ticket commercial projects moving through the construction pipeline that will help sustain elevated growth rates,” BMI said.

“ Given our Oil & Gas Team's expectation that oil is unlikely to rebound to the higher prices of the last decade and a half, we expect similar projects and investment pledges to accelerate going forward,” the report concluded. – TradeArabia News Service