Confidence In Dubai's Trajectory Confirmed

The tourism sector in Dubai continues to provide opportunities for the recovering construction industry , in lin e with our view that the emirate will be the outperformer in the UAE , whilst Abu Dhabi still experiences the legacy of oversupply and failed investment s prior to 2008 . Damac Holdings , the region's largest property developer, has awarded the construction contract for an AED1bn (US$272mn ) hotel and residential development to TAV Construction . The Damac Towers by Paramount is a complex of four towers linked by a multi-level commercial plaza at its base. Enabling works at the site in the Burj area have already been completed and as such construction is expected to start imminently on Damac's most expensive single project to date and will be completed in 2016 .

On the back of good economic growth forecasts, standing at an average 3.8% year-on-year in real terms between 2013 and 2017 and tourism data which indicates that both numbers of arrivals and average room rates per nights are on the up, we continue to be positive on the growth of the construction industry in Dubai. T his year we forecast that in real terms the UAE construction sector will grow by 4.8% on the previous year, which will then rise to 5.3% by 2017. The involvement of Paramount in developing this project signals the trend for big international brands increasing their leisure footprint in the UAE to take advantage of this growing tourism market. Ferrari already has their own theme park and Universal Studios has plans for a theme park in the US$5.7bn Mohammad Bin Rashid City project.

Confidence In Dubai Supports Growth
Construction Industry Value (AEDbn) and Real Growth (% Change)

The contract win for TAV is in line with our previously highlighted opportunities for the company in the Middle East region in light of their failed attempt to secure the construction of Istanbul's third airport ( see 'Record Breaking Auction, But Airport Fundamentals Still Questionable', 10 May). This has played out, with the company seeking numerous contracts based in the UAE, for example the Marina 101 tower in Dubai Marina and as part of a joint venture, the $3bn Midfield Terminal Building at Abu Dhabi International Airport. This trend is likely to continue given our recent downgrade of our forecasts in their domestic Turkish construction sector due to poor economic prospects over the short-term and opportunities such as Iraq's planned US$2.5bn airport - an area in which TAV specialises ( see 'High Hopes For New Airport But Risks Persist', 02 September).


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