QATAR CONSTRUCTION
SECTOR OVERVIEW 2020
15 March 2020
1
CONSTRUCTION SECTOR OVERVIEW
CONSTRUCTION SECTOR OVERVIEW COVERING THE PERIOD 2016 TO 2029
INTRODUCTION
This construction sector overview (“Overview”) has been
prepared by Consulting HAUS LLC and seeks to compare
published data from international sources such as Fitch
Solutions (“FS”) to data released from the Planning and Statistics
Authority (“PSA”) and information gathered via primary market
interviews with a cross section of market participants in Qatar.
After assessing the various sources of data, and taking into
consideration the primary market research, the Overview
concludes upon the market outlook for the construction sector
in the coming years.
Users of the Overview are encouraged to undertake their own
independent research before making any business-related
decisions based on the content of the Overview. Furthermore,
the Overview does not consider the potential impact of COVID-
19 as no data is yet available. In the event you would like any
support in dealing with the impact(s) of COVID-19 on your
business, please contact your local Consulting HAUS LLC
representative today.
AUTHOR
Nabih Jaroudy
Senior Analyst
M: +974 6616 7095
nabih.jaroudy@consultinghaus.qa
2
CONSTRUCTION SECTOR OVERVIEW
AN INTRODUCTION TO CONSULTING HAUS LLC
CONSULTING HAUS LLC IN QATAR
Established a little over a year ago, Consulting HAUS LLC has emerged as Qatar’s only boutique
corporate finance firm with a focus on supporting SMEs and large corporates. During the first year of
operations we oversaw the successful delivery of several strategic engagements including:
• The provision of project management services to the founding board of a bank;
• Supporting successful Tawteen applicants to prepare detailed market, technical and financial
feasibility studies;
• Undertaking a number of high-profile valuation assignments including PPA and intangible asset
valuations;
• Being appointed as sell-side advisors to a number of companies including a market leading
manufacturing company and one of the newest most technologically advanced health centers in Laith Dajani
Qatar; and Managing Partner
• Restructuring a group of gyms, following which an investor was found to support an expansion plan. M: +974 5005 1465
laith.dajani@consultinghaus.qa
In 2019, we also implemented our virtual CFO services which are specially aimed at supporting SMEs
to improve performance, manage cash and drive value.
www.consultinghaus.qa
In 2020, our focus will remain on maximizing the value of our clients’ businesses by providing hands on
support and being seen as an extension to our clients’ management teams.
3
CONSTRUCTION SECTOR OVERVIEW
THE OUTLOOK FOR QATAR'S CONSTRUCTION SECTOR POINTS TO MODERATE GROWTH ACROSS THE NEXT
DECADE, WITH A SHARP DECLINE IN ACTIVITY OCCURRING IN THE TWO YEARS FOLLOWING FIFA2022
OVERVIEW NUMBER OF PROJECTS AWARDED (2016 – 2019)
• Ever since the blockade imposed by K.S.A, U.A.E, Bahrain and Egypt in June 2017 (the “Blockade”), Qatar
has been determined to diversify its economy, establish new global trading relationships and become less 274
vulnerable to similar threats and risks, which may occur in the future. As a result, the implementation of
the initiatives outlined in the Qatar National Vision 2030 (“QNV2030”) have been accelerated. 243
230
• There has been a clear focus on expanding the agriculture sector (to improve food security), the
manufacturing sector (with initiatives such as Tawteen which aims to localize Qatar Petroleum’s supply 214
chain) and lastly, the construction sector as the country continues to invest in key infrastructure and other
construction related projects.
• According to the latest data published by the PSA, the construction sector’s contribution towards overall
GDP in 2019 is estimated at 15.8% (up from 14.0% in 2018) and is projected to increase by a further 1.75
percentage points in 2020. This is in contrast to the views of FS who reported that the construction sector’s
contribution to overall GDP in 2019 stood at 14.0% and this is expected to decrease to 13.8% in 2020. 2017
2016 2018 2019
Unlike the PSA who assume continued market growth, FS report that the construction sector contracted by Source: Venture Onsite (April 2019)
c.4.1% in 2019 with a minimal amount of growth (c.0.7%) being expected in 2020.
• Based on our discussions with market participants, the general view is that the overall number of projects
released into the market reduced in 2019 with Q1 to Q3 being slow quarters. Q4 showed signs of VALUE OF PROJECTS AWARDED (2016 – 2019)
improvement, particularly with the release of a number of ‘mega’ projects such as the Hamad
International Airport expansion (valued at QAR6.6b) and the Lusail Commercial Boulevard (valued at QAR57.8b
QAR2.1b). The feeling of increased market activity has continued into the early part of 2020, however, with
QAR56.7b
only a few months past, no significant conclusions can be drawn.
QAR49.0b
• Based on our analysis, and following the market contraction in 2019, we predict that the construction
sector will return to growth in 2020 and 2021 with growth in 2021 surpassing that of 2020 as the country QAR47.6b
gears up to host the FIFA World Cup 2022 (“FIFA2022”).
• The adjacent graph (top-right) details the number of awarded projects in each year from 2016 to 2019. The
data supports the feedback received from the market participants interviewed, particularly in relation to
2019 where the number of awarded projects was less than in 2017 and 2018.
• It is important to note that while the number of projects awarded provides an indication on market activity,
it does not have a direct correlation to the value of the overall construction sector as it does not capture
the size of the projects in monetary value. 2016 2017 2018 2019
Source: Venture Onsite (April 2019)
4
CONSTRUCTION SECTOR OVERVIEW
GOVERNMENTAL AND SEMI-GOVERNMENTAL COMPANIES ARE THE LARGEST SPENDERS IN THE
CONSTRUCTION SECTOR
TOP 10 CLIENTS BY VALUE OF PROJECTS AWARDED (QARm.) - 2019
Ashghal 19,143
HIA 6,880
QDREIC* 3,705
QP 3,076
Kahramaa 2,008
Ariane Real Estate 1,763
NBK & Sons Group 1,643
MoQ 1,460
QAF 1,351
SCDL** 1,150
*QDREIC: Qatar Diar Real Estate Company. **SCDL: Supreme Committee for Delivery and Legacy Source: Venture Onsite (April 2019)
TOP 10 CONTRACTORS BY VALUE OF PROJECTS AWARDED (QARm.) – 2019
Urbacon Trading & Contracting (UCC) 7,890
Tepe Akfen Ventures (TAV) 3,650
Redco Construction - Almana 2,665
Al Ali Engineering WLL 2,519
Qatar Building Company (QBC) 2,258
Domopan, Qatar 2,245
Al Darwish Engineering 2,200
Petroserv Limited 1,887
Samsung C&T Corporation 1,825
Harinsa Qatar 1,763
Source: Venture Onsite (April 2019)
5
CONSTRUCTION SECTOR OVERVIEW
REFORMS IN FOREIGN PRIVATE INVESTMENTS AND ECONOMIC DIVERSIFICATION AIDED THE CONSTRUCTION
SECTOR, HOWEVER, THE BLOCKADE AND RELIANCE ON IMPORTS ARE SUBSTANTIAL OBSTACLES
W O T
STRENGTHS WEAKNESSES OPPORTUNITIES THREATS
• The large hydrocarbons revenues • Heavy reliance on imported • The government aims to diversify • The Blockade resulted in the
have allowed the government to construction materials and foreign its economy away for the oil closure of land borders and the
develop ambitious and well- workers has resulted in many sector by developing healthcare, suspension of exports. The rift
funded development plans such as project delays and price inflation education, tourism, ports and between the GCC could worsen
those outlined in QNV2030. in the wake of the Blockade. roads. with negative implication on the
• Construction of large-scale • The processes for project • Hosting FIFA2022 will continue to construction sector.
transport infrastructure projects is management are not mature result in considerable contracts • The potential break-up of the GCC
underway which will ease the which is leading to project across the construction and could jeopardize long-term plans
strain on existing infrastructure. implementation delays. infrastructure sectors. to invest in regional transport
• The involvement of large foreign • A lack of private sector investment • Iran is developing as an alternative integration.
firms in the construction of leaves the sector vulnerable to to the GCC as a source of building • Oil price fluctuations have
residential/non-residential and declines in government spending. materials with materials such as magnified effects on government
infrastructure projects, underline This appears to have been the cement being increasingly sourced spending which in turn effects the
the attractiveness of the market. case in 2019 which is supported from Iran. construction market. However,
• The ability to set-up foreign by the views of the market • The government is in the early due to healthy financial reserves,
private companies through a participants and FS. The stages of assessing how to Qatar is expected to be able to
range of investment mechanisms, government is trying to encourage increase FDI and the possibility of deal with fluctuation better than
in addition to low taxes, has more private participation, an un-restricted 100% foreign other GCC countries.
attracted numerous private example of which is the various ownership across all sectors may • Regional security threats are
foreign companies. PPP initiatives that have been soon become a reality. heightened owing to GCC
released in the last couple of involvement in the conflicts in
years. Iraq, Syria, Yemen and Libya.
6
CONSTRUCTION SECTOR OVERVIEW
ACCORDING TO FS, THE CONSTRUCTION SECTOR WILL WITNESS OVERALL NEGATIVE GROWTH
BETWEEN 2019 AND 2023 WITH AN ASSOCIATED CAGR OF -2.0%
CONSTRUCTION SECTOR: FS VIEW FS CONSTRUCTION SECTOR GROWTH: 2016 - 2028 (QARb.)
• After the construction sector witnessed continued 18.2%
and significant growth in the last decade, the sector is
98.4
expected to see a sharp correction over the coming 94.4 95.1 96.1
91.1 90.4 87.0 87.1 87.5 88.1 89.1 90.5 92.0
years as projects associated with hosting the
FIFA2022 are completed. 77.1
29.0
• 2019 witnessed the first negative growth in the 27.6 29.2 29.8 30.2
30.3 30.4 30.9 31.4 32.0 32.6 33.2 33.9
period under review and despite FIFA2022 being less 24.8
than 2 years away, minimal growth is projected in the 8.0%
years leading up to 2022. 1.6% 1.7%
0.7% 1.1% 0.1% 0.5% 0.7% 1.1%
• A further contraction is anticipated after the event as
infrastructure and other ‘mega’ projects in the -4.1% -5.9%
residential/non-residential sub sectors conclude. -3.8%
52.3 63.50 69.4 65.2 65.3 65.9 60.1 56.6 56.2 56.1 56.1 56.5 57.3 58.1
• The annual growth rates are projected to witness
marginal improvements after 2023 with an associated 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
CAGR of 0.9% between 2023 and 2029.
• Post 2022 the infrastructure sub sector is expected to
Residential/non-residential Infrastructure Construction sector y-o-y growth
be driven by energy and utility projects. Furthermore,
Source: FS
a healthy pipeline of wastewater and desalination
plants exists to maintain fresh water supply. CONSTRUCTION SUB-SECTOR BREAKDOWN
• The inner Doha re-sewage implementation strategy
project will be conducted in 15 phases with a total
investment of QAR9.9b is expected to drive growth 31.3% 36.1%
for this sub sector.
• Despite the government’s efforts to diversify the
economy by initiating and supporting social, Average Average
educational, health and industrial projects, this is un- (2016 – 2022) (2019 – 2023)
likely to be sufficient to sustain the levels of growth
witnessed by the construction sector over the last
68.7% 63.9%
decade.
Source: FS
Residential/non-residential Infrastructure
7
CONSTRUCTION SECTOR OVERVIEW
THE RESIDENTIAL/NON-RESIDENTIAL SUB-SECTOR IS EXPECTED TO WITNESS NEGATIVE GROWTH WHILE
THE LESS VULNERABLE INFRASTRUCTURE SUB-SECTOR WILL REMAIN RELATIVELY STABLE
RESIDENTIAL/NON-RESIDENTIAL OVERVIEW FS-RESIDENTIAL/NON-RESIDENTIAL GROWTH RATE
• The numerous new sporting stadiums, retail offices, developments and 21.4%
housing projects have been a major source of growth in the sub-sector in
preparation for FIFA2022. However, the thin project pipeline to replace
completed project means the future growth of the residential/non- 9.4%
residential sub-sector is unlikely to match that of the prior years.
• Furthermore, projects that are not linked to FIFA2022 such as the Lusail Golf 1.3% 1.5%
Residential Development (QAR17.9b), the Hilton Beach Resort (QAR14.2b) 0.2% 0.9% -0.7%-0.2% 0.1%
0.7%
and the Doha Festival City project (QAR6.6b), are also nearing completion.
-6.1% -5.8%
• Despite the QNV2030, there is little evidence to support that there is a -8.8%
healthy enough pipeline to replace these projects, which leads to an
anticipated market contraction of 8.8% in 2022 and a modest CAGR of 0.5%
between 2023 and 2029.
INFRASTRUCTURE OVERVIEW 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Source: FS
• Qatar is developing its non-oil sector including infrastructure development in
areas such as transportation and power and water plants.
FS INFRASTRUCTURE GROWTH RATE
• The infrastructure sub-sector is expected to have a larger contribution to the
construction sector post 2022 as this sub-sector is not as closely linked to 11.5%
FIFA2022 as the residential/non-residential sub sector.
• The projected CAGR between 2023 and 2029 is estimated at 1.8% with no
market contractions expected but rather a slowdown in historical growth
rates.
• Projects such as the Sharq crossing with an estimated investment of 4.9%
QAR43.7b, the QAR12.7b Long Distance Rail and numerous desalination
plants and wastewater management projects, are expected to be the main
drivers for the continued growth of this sub sector in the post FIFA2022 era. 2.0%
1.4% 1.7% 1.6% 1.7% 1.9% 2.0% 1.9%
0.8%
0.3% 0.3%
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Source: FS
8
CONSTRUCTION SECTOR OVERVIEW
FS GROWTH RATES SEEM TO BE REFLECTIVE OF THE CURRENT MARKET SENTIMENT
CONCLUSION ON FS GROWTH RATES
Based on primary market interviews with construction
and construction related companies, the FS growth rates
seem to be reflective of the general market sentiment.
Whilst certain companies have witnessed continued
growth in the last several years, the level of growth has
typically been on a downward trajectory.
Almost all market participants interviewed cited 2019 as
being one of the toughest years in recent times based
on their view that the value of public spending has been
lower than in the past. In the wake of a thin pipeline of
projects announced, market participants are pragmatic
on their view of market growth until 2022 and beyond.
9
CONSTRUCTION SECTOR OVERVIEW
CONSTRUCTION RELATED EXPENDITURE IS EXPECTED TO WITNESS A SMALL INCREASE IN 2020 AND 2021
DRIVEN BY THE FINALIZATION OF FIFA2022 PROJECTS
CONSTRUCTION PROJECTS
• An expansion of Hamad international Airport will see its capacity increase from 50 to 65 million passengers annually.
• Hamad Port’s development would make the port one of the deepest in the region with the ability to handle 12 million containers annually.
• Expansion of the passenger terminal and connecting the airport to the train network (Doha Metro).
• Linking the country’s hotspots together by train, or metro such as the residential areas to industrial ones and to essential hubs like Lusail City, Education City, and
West Bay.
• Completion of a large number of dwellings in Lusail and buildings in the Pearl which is expected to accommodate more than 200,000 residents.
• Development of Msheirib Downtown Doha to become the financial hub and a tourist attraction.
• Completion of nine new shopping malls including North Gate Mall and Place Vendome, and planned construction of a large number of hotels to increase the
tourist intake to over 20,000 by 2022.
• The government has boosted this sector further by the construction of a rehabilitation center: Naufar, at Hamad Medical City amounting to QAR557m, the Doha
north sewage treatment plants serving 900,000 people, and upgrading the road’s drainage systems with a value of c.QAR5.1b.
FIFA2022 STADIUMS
Lusail Stadium - Al Bayt Stadium – Al Janoub Al Rayyan Khalifa Qatar Foundation Al Thumama Ras Abu Abboud
Under Est. completion Stadium - Stadium – Est International Stadium – Est. Stadium – Under Stadium– Under
construction 2020 completed completion 2021 Stadium - completion 2020 construction construction
Completed
Source: SCDL
10
CONSTRUCTION SECTOR OVERVIEW
THE PROJECT PIPELINE FOR THE CONSTRUCTION SECTOR STILL CONTAINS A NUMBER OF ‘MEGA’
PROJECTS THAT WILL CONTINUE BEYOND 2022
QARb. QARb.
Project name - Status Project name - Status
36.4 43.7
HIA City – Design stage Sharq crossing – Concept stage
32.8 12.7
Electric car plant – Concept stage Long distance rail network - Design stage
RESIDENTIAL/NON-RESIDENTIAL PROJECTS
21.8 12.7
Ras Laffan Industrial City – Concept stage Facility E IWPP – Tendered for construction
INFRASTRUCTURE PROJECTS
5.5 10.9
Barwa City phase 2 – Concept stage Desalination plant – Concept stage
5.5 9.1
Qetaifan Island phase 2 – Concept stage West Bay rail – Concept stage
4.4 5.5
New Medical City – Design stage Doha Metro Green line – Tendered for construction
4.4 4.4
North Field Development – Tendered for construction Hamad Port phase 2 – Concept stage
2.9 1.8
Le Petit Paris phase 2 Place Vendome – Design stage Doha Metro Red line – Tendered for construction
2.9 1.8
Katara phase 5 – Design stage Al Khor bypass – Design stage
2.0 1.6
ISF Camp – Design stage North road phase 4 – Design stage
Source: Venture Onsite
11
CONSTRUCTION SECTOR OVERVIEW
PUBLIC SPENDING HAMPERED THE CONSTRUCTION SECTOR IN 2019 HOWEVER, EARLY SIGNS INDICATE
THAT 2020 MAY WITNESS A SLIGHT RECOVERY
CONCLUSIONS
• The main source for construction spending is provided by governmental and semi-
governmental entities such as Qatar Rail, Qatar Public Works Authority and QP which
have been impacted by declining oil and gas prices,. Furthermore, the Blockade is
aggravating the situation for the following reasons:
i. Increase in the price of raw materials;
ii. Project delays as a result of changes in the supply chain; and
iii. Public funds being directed towards eliminating negative impacts of the Blockade.
• The accumulation of the above-mentioned factors came into fruition during 2018 and
2019, with the market suffering from a lack of liquidity and a reduced amount of public
spending on construction related projects targeted at boosting the economy.
• FIFA2022 has been one of the main drivers of the construction sector in the past few
years, and despite the majority of the ‘mega’ projects under progress or complete, it is
anticipated that there will be a upsurge in activity in the release of small to medium
sized projects in 2020 and 2021 as the country applies the final touches before
commencement of the tournament.
• Based on published sources, growth is projected to be minimal in 2020 and 2021
followed by a period of negative growth in 2022 and 2023 of -5.9% and -3.8%
respectively.
• With oil and gas prices witnessing a free fall due to the COVID-19 outbreak and OPEC
countries failing to reach a consensus on oil production regulation, the positive
momentum of the construction sector carried over from Q4 2019 is likely to be
negatively impacted which may result in the small projected growth of 0.7% in 2020
being reduced.
• It is likely that there will be a period of market adjustment in the coming years to adapt
to the new reality of minimal/negative growth rates meaning smaller contractors will
be at risk as they struggle to compete for projects. Based on the primary market
interviews, signs of market consolidation are already being felt with profitability
margins being on the decline as a result of fewer projects and increased competition.
12
CONSTRUCTION SECTOR OVERVIEW
QNV2030 AND THE CONTINUED GOVERNMENT SUPPORT FOR THE CONSTRUCTION SECTOR ARE
EXPECTED TO PROP UP THE SECTOR POST FIFA2022
FINAL THOUGHTS
The construction sector witnessed several years of
sustained growth which has encourage investors to
enter the market. Several market participants
interviewed state they have not seen any growth in the
last few years quoting increased competition (which has
resulted in a certain level of price cutting) and a lower
number of projects being released as the main two
causes.
Moving forward, Qatar still has a way to go to achieve
QNV2030, however, the growth witnessed in the past is
unlikely to be repeated especially in the construction
sector as the market transitions from a period of
sustained growth to a period of maturity. With the
Blockade still in place, other geo-political risks on the
rise and global disruption events such as the emergence
of COVID-19, it appears that the level of growth
predicted by FS are significantly more reasonable that
their market outlook 12 months ago when significant
growth was projected year on year until 2028.
13
14
