Middle East Handbook. Property and Construction Handbook 2017 Edition

Transcription

1 Middle East Handbook Property and Construction Handbook 2017 Edition

2 AECOM Middle East Handbook 2017 FOREWORD Welcome to the eleventh edition of the Middle East Construction Handbook. We hope that you will find our assessment of the trends shaping the global and regional construction industry of interest and this year s selection of articles and cost data of value. This year, we started off by reviewing the global macro-economic factors that categorised 2016 as a challenging year for the world economy. Weak global demand and rising supplies dampened both commodity and oil prices, while rising political risks inhibited investment growth. These broad factors and many others have further impacted the global and regional construction markets. A detailed review of these factors and our anticipated trends for are provided in Section 1. Overall, despite the heightened uncertainty in the global and regional markets, stakeholders across the construction industry remain cautiously optimistic. Our articles section reviews a few niche construction markets that have shown resilience in challenging economic times. We review design and cost drivers of tall towers that shape cities skylines, hospitals that meet rising demands in healthcare and data centres that are continuously being built to match the exponential growth in information technology. The articles also include reference cost models that provide an order of magnitude of key cost components in each niche market. If you are new to the Middle East construction industry, section 3 will provide you with insights about procurement routes, forms of contract in the Middle East and building regulation and compliance. If you are a veteran in the Middle East industry, section 3 will provide you with a reminder of key contract and regulatory information, a good reference to keep. The handbook concludes with our reference section, international and regional cost data and a directory of our offces in the region. As with previous years we continue to seek feedback in everything we do. Please contact the editor, Jowhara Al-Harazi via bi_middleeast@aecom.com for further information. 2

3 Middle East Handbook 2017 AECOM Kingdom Centre, Riyadh, KSA 02. King Hussain Medical Centre, Amman, Jordan 03. Al Madina, Al Shamaliya, Bahrain 04. Sentinel Data Centers, NJ, USA 3

4 AECOM Middle East Handbook 2017 CONTENTS Economic Round Up Articles Reference Articles 11 Global economic review 27 Middle East economic review 50 Commercial offce towers 58 Private hospitals 69 Data centres 78 Procurement routes 81 Middle East forms of contract 86 Building regulations and compliance 4

5 Middle East Handbook 2017 AECOM Reference Data Directory of Offces 92 International building cost comparison 99 Regional building cost comparison 100 Mechanical and electrical cost comparison 101 Major measured unit rates 102 Major material prices 103 Labour costs 104 Middle East Index 106 Typical building services standards for offces 108 Exchange rates 109 Weights and measures 110 Basis of construction costs 116 Directory of offces 5

6 AECOM Middle East Handbook Midfield Terminal Complex, Abu Dhabi, UAE 02. The Gate, Doha, Qatar 03. Meydan ONE, Dubai, UAE 04. King Khalid Medical City, Dammam, KSA 05. Orbital Highway, Doha, Qatar 06. DAMAC Heights, Dubai, UAE

7 Middle East Handbook 2017 AECOM AECOM Middle East AECOM has been in the Middle East since 1948 and is one of the largest planning, design and project management firms in the region. With our global reach and resources, we continue to deliver many of the large, complex and multi-disciplinary projects that are being developed throughout the region. Our team of experts provide project-specific solutions to the complex problems our clients face. With a team of nearly 4,000 professionals in the Gulf region, we cover a broad industry focus including buildings, transportation, infrastructure, water and urban developments. Our core services include architecture, building engineering, construction services, design and planning, economics, energy, environment, program management, program and consultancy, transportation and water. Within these core services, our team of experts provide project-specific solutions to the complex problems our clients face. For eight years, we have been ranked the #1 engineering design firm by revenue in Engineering News Record magazine s annual industry rankings. AECOM has also been recognized by Fortune magazine as a World s Most Admired Company for three years running. Our professionals are involved in some of the largest projects in the region, helping to shape the infrastructure of Bahrain, Qatar, Oman, the United Arab Emirates and the Kingdom of Saudi Arabia. 7

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9 Middle East Handbook 2017 AECOM Section ONE Economic Round Up 9

10 AECOM Middle East Handbook

11 Middle East Handbook 2017 AECOM Global economic review World economic growth in 2016 was negatively affected by a range of economic, political and regulatory variables, resulting in the lowest growth rate since the 2008 financial crisis. These downward risks to economic growth are expected to ease in 2017; however growth forecasts in the short-medium term remain largely subdued. The International Monetary Fund estimates the global growth domestic product (GDP) to grow by 3.5% in 2017 and 3.6% in Figure 1. Annual percent change in key world statistics % change y-o-y % change y-o-y e 2017f 2018f 2019f 2020f 2021f Source: IMF Inflation, average consumer prices Trade volume of goods and services Gross domestic product, constant prices 11

12 AECOM Middle East Handbook 2017 Since the downturn in 2008, Emerging and Developing Economies (EMDEs) have been major contributors towards positive economic growth. While EMDEs economic growth drivers (population growth, urbanization and infrastructure demands) remain strong, weak commodity prices coupled with the cyclical drop in demand due to rising material inventories has impacted the purchasing and investment capacity of many EMDEs. EMDEs are expected to grow by 4.5% and 4.8% in 2017 and 2018 respectively. Within the EMDEs, emerging and developing countries in Asia are expected to grow the fastest, with annual growth rates of 6.4% anticipated in 2017 and Figure 2. GDP (Constant prices) Figure 3. GDP (Constant prices) of emerging and developing countries by region % change y-o-y e2017f 2018f 2019f 2020f 2021f World Advanced economies EMDEs Source: IMF % change y-o-y e2017f 2018f 2019f 2020f 2021f -2-4 EMDEs MENA Latin America and the Caribbean Source: IMF Europe Asia Sub-Saharan Africa Note : Advanced Economies - United States, Euro Area and Japan EMDEs - Emerging and developing countries in Africa, Asia and Latin America 12

13 Middle East Handbook 2017 AECOM The reduction in world economic activity in 2016 is further demonstrated by countries' muted growth in gross capital formation. The gross capital formation/ investment measure includes production of fixed assets (e.g. machinery, equipment, residential buildings, other buildings etc.). EMDEs percentage of investment is typically higher than advanced economies, as EMDEs need to make larger investments towards creating new assets rather than maintaining them. With the exception of the MENA region, all regions around the world are estimated to have reduced their capital investments in According to IMF estimates, countries are expected to increase their investments as a percentage of their overall GDP by 1% annually. Figure 4. Gross capital formation / Investment as percentage of GDP Figure 5. Gross capital formation / Investment as percentage of GDP by emerging region % of GDP e2017f 2018f 2019f 2020f 2021f Source: IMF World Advanced economies EMDEs % of GDP e2017f 2018f 2019f 2020f 2021f EMDEs MENA Latin America and the Caribbean Source: IMF Europe Asia Sub-Saharan Africa 13

14 AECOM Middle East Handbook 2017 A further review of investments within the global markets demonstrates a drop of around 13% in foreign direct investments between 2015 and is expected to record a higher investment level, with approximately USD 810 billion announced in greenfield investments during The largest investment in greenfield projects is planned in developing Asian countries. Figure 6. Percent of world FDI Inflows by region, USD Billions Figure 7. Announced greenfield project values by region, USD Billions 3% Africa 3% 10% Latin America and the Caribbean 9% 6% Other developed countries 5% 27% Europe 26% USD Billions European Union North America Transition Economies Developing Asia Latin America and the Caribbean Africa Other developed countries 2015, Total USD 769 Billion 2016e, Total USD 810 Billion e 22% North America 27% Source: UNCTAD 30% Developing Asia 27% 2% Transition economies 3% Outer circle 2015, Total USD 1750 Billion Inner circle 2016e, Total USD 1525 Billion Source: UNCTAD 14

15 Middle East Handbook 2017 AECOM Commodities Commodity prices softened in 2016 with the drop in world demand and reported high levels of inventories in major markets, including the US and China. Commodity prices have increased slightly during the beginning of 2017, however have shown signs of softening in the second quarter of Growth and stability of commodity prices will depend on changes in global demand, policy, distribution channels, technological advances and geopolitical conditions. Oil prices Oil prices dropped to their lowest levels in early 2016, however showed signs of recovery towards the end of the year, continuing to the first half of Increased oil demand in emerging markets to fuel growing manufacturing and industrial sectors, particularly in India and China, improving economic performance of European markets and steady growth of automotive sales in the US have all contributed to the rise in oil prices. Within the global market, the largest three consumers of oil at a country-level are the US, China and India, representing 21%, 12% and 5% of world demand in respectively, as estimated by OPEC. Review of demand by region shows that developing Asian economies, including China and India, represent 31% of world demand. Changes in oil demand within developing Asian economies can impact the price of oil. OPEC anticipates that demand within developing Asian economies will be strong in the short-medium term, with India expected to show the highest rate of growth at 2.7% and 3.5% in 2017 and 2018 respectively. Figure 8. Oil demand by region / Country, mb/d 5% India 5% Other*** 7% Latin America 8% OECD Asia Pacific** 8% Middle East 12% China * Excludes India and China and includes former Soviet Union countries ** Includes Australia, Japan, New Zealand and South Korea Source: OPEC Figure 9. Growth in oil demand by region 4% Africa 21% US 16% Europe 14% Developing Asia* 4% 2018f 2017f 3% % change y-o-y 2% 1% 0% -1% United States Source: OPEC Europe Developing Asia* China Middle East OECD Asia Pacific** Latin America Other*** India Africa 2017f 2018f World average 2017 & % 15

16 AECOM Middle East Handbook 2017 Metals Major metal prices fell in 2016 but are anticipated to increase in 2017, stabilizing marginally in the short-medium term. The latest IMF forecasts indicate that a double digit increase in metal prices is possible in 2017, supported by increases in industrial, manufacturing and construction activities in EMDEs and the Euro Area. This increase is highly susceptible to policy changes, trade and environmental impacts, and the ability of countries to move ahead with their stimulus project plans. Year-to-date (YTD) improvements in prices remain modest, limiting growth in commodity exporting countries. Figure 10. Changes in metal prices 100% 80% 60% % change y-o-y 40% 20% 0% -20% e 2017f 2018f 2019f 2020f 2021f -40% -60% Source: IMF Copper, grade A cathode, LME spot price, CIF European ports Aluminum, 99.5% minimum purity, LME spot price, CIF UK ports Iron Ore, China import Iron Ore Fines 62% FE spot (CFR Tianjin port) 16

17 Middle East Handbook 2017 AECOM Risks and challenges Policy changes remain at the forefront of global economic risks despite a reduction in election-related risks. Economic plans of the U.S. administration, particularly in terms of trade, are uncertain however are expected to be less expansionary, affecting growth of the US economy and its major trade partners by association. Furthermore, a shift towards protectionist type policies poses a downward risk to global economic growth, with possibilities of disrupting supply chains and reducing global production and effciency. Monetary policies in major economies pose another downward risk to global economic growth. The World Bank anticipates that increases in U.S. yields would trigger a depreciation of currencies of EMDEs and as a result negatively impact foreign investments in EMDEs. Shifts in China s monetary policy also poses a risk to global growth through shifts in trade, commodity prices and consumer sentiments. Fiscal stimulus plans in major world economies, including the US and China, and increased investments in EMDEs represent an upward risk. If plans of major projects and spending materialize, this could improve market sentiments, domestic demands and further support economic growth between trade partners. Geopolitical tensions and unrest continue to provide a downward risk on global economic markets, particularly in countries closest to areas of conflict. Global policy uncertainty is a measure developed (Davis, 2016) to gauge uncertainty sentiments by measuring the frequency of articles in domestic newspapers mentioning economic policy uncertainty." The economic policy uncertainty (EPU) index recorded in 2016 is the highest since January 2000, and reflects high level of uncertainty within economic markets. With a reduction in election-related risks, the 2017 EPU Index reduced significantly however remains similar to levels recorded during the economic crisis in Figure 11. Global EPU index with PPP - adjusted GDP weights Global EPU Index Jan-00 Sep-00 May-01 Jan-02 Sep-02 May-03 Jan-04 Sep-04 May-05 Jan-06 Sep-06 May-07 Jan-08 Sep-08 May-09 Jan-10 Sep-10 May-11 Jan-12 Sep-12 May-13 Jan-14 Sep-14 May-15 Jan-16 Sep-16 May-17 Source: Policy Uncertainty, Davis

18 AECOM Middle East Handbook 2017 Global construction prospects Outlook for the global construction market follows the same outlook for the wider economies within each region. EMDEs are the largest construction markets and are expected to grow the fastest in the short to medium term. However, materialization of construction projects remain at the risk of changes in global trade levels, commodity prices, policy changes and geopolitical situations. 18

19 Middle East Handbook 2017 AECOM Asia Asian construction markets are estimated to be the largest in the world currently. BMI estimates the construction market pipeline in Asia to be at around USD 3.9 trillion as of June Value of the construction industry in Asia is estimated by BMI for 2017 to be around USD 1.7 trillion. Real demographic demands of growing urban population and needed investment in transportation to support trade is expected to further drive construction industry growth in Asia. According to recent estimates by BMI, Asia s construction market is expected to grow at a rate of 4.7% annually between 2017 and China is the largest construction market in Asia and is expected to grow by 5.1% annually between 2017 and China s One Belt, One Road (OBOR) initiative is considered a key driver in infrastructure development in Asia, and includes mega projects such as the China-Pakistan Economic Corridor project valued at over USD 60 billion. This project was launched to promote infrastructure development and connectedness between the two countries. Figure 12. Asian construction industry value India, considered the third largest construction market in Asia, is expected to grow by 6.7% annually between 2017 and This growth is driven by strong domestic demands and supported by increased government spending and positive economic performance within the world trade markets. The fastest growing construction markets within Asia are ASEAN (excluding Singapore) and South Asia (excluding India) where countries are striving to bridge the infrastructure demands to meet local consumer demands and improve regional connectedness. Bangladesh, Malaysia and the Philippines have all announced ambitious construction plans. As reported by BMI, Bangladesh signed financing and developments deals with China valued at USD 38 billion in 2016, Malaysia has allocated USD 10.8 billion to support infrastructure development in 2017 and the Philippines intends to spend USD 144 billion towards infrastructure development between 2016 and Table 1: Asian construction market ranking USD Bn Average Annual 4.7 % Growth Construction Market Market Size Ranking by Value Average Real Annual Growth China 1 5.1% Developed Asia 2 2.0% India 3 6.7% ASEAN excl. Singapore 4 7.8% South Asia excl. India 5 8.9% Source: BMI, AECOM f 2021f Source: BMI, AECOM Construction industry value 19

20 AECOM Middle East Handbook 2017 North America The U.S. construction market continues to be the largest in North America. Despite uncertainties associated with government funding and corporate tax reforms the U.S. construction market is expected to grow between 4 to 8% in the period. Since the early 2000 s construction spending in the U.S. has been dominated by the private sector, representing around 70% of total construction spend. This trend in spending means that the outlook is more dependent on private sector sentiments and performance than government spending. Figure 13. Average split in US construction spending by source and time period % 72% Public Private % 69% % 77% 0% 20% 40% 60% 80% 100% Source: US Census Bureau 20

21 Middle East Handbook 2017 AECOM The residential market is expected to grow at a faster pace than the non-residential sector, estimated at 4% and 8% respectively. Demographic changes and improvements in economic spending per capita help support expansion within the residential sector. Performance of the non-residential sector is expected to vary considerably between 2017 and 2018, with retail and commercial sectors estimated to grow by 10% and 8.9% in Improvements in overall economic activity and respectively prevailing market sentiments help support growth within the non-residential construction sector. Figure 14. Changes in US construction spending 40% 30% % change y-o-y 20% 10% 0% -10% -20% -30% -40% f Non Residential Residential Source: US Census Bureau, Building Solutions Figure 15. Forecasted US non-residential construction growth by sector 12% 10% % change y-o-y 8% 6% 4% 2% 0% -2% -4% -6% -8% 2017f 2018f Retail & Other Commercial Hotel Industrial Amusement & Recreation Commercial Education Health Source: Policy Uncerta Source: US Census Bureau, AIA 21

22 AECOM Middle East Handbook 2017 Latin America The Latin American construction market pipeline is estimated at USD 842 billion. The market s development is driven by real demographic and economic factors; however development materialization risks remain high given the weak economic growth recorded by the countries in the previous two years and the project s dependence on private and external funding. Brazil s construction pipeline represents about 35% of the Latin American construction market pipeline as estimated by BMI; however there is rising uncertainty in a number of these projects moving forward as the country continues to be burdened with the poor economic performance of previous years, and a fragile political environment. Growth of the construction industry within other key Latin American markets is modest with major transport and energy projects announced in Colombia, Panama and Guatemala. Colombia s construction market is expected to grow the fastest between the period of 2017 and 2021 as it is anticipated that the 4G Highway Concessions Programme announced, valued at USD 25 billion, will stimulate construction market growth. Transportation and energy & utilities dominate the project pipeline as estimated in July 2017 by BMI. Latin American countries need to bridge the transportation and energy infrastructure gaps quickly to support their economic growth. Focus in these sectors is also driven by preferences of foreign investment funds. Figure 17. Value of construction industry annual real growth Selected Latin American Countries % change y-o-y f 2018f 2019f 2020f 2021f Brazil Chile Colombia Guatemala Panama Peru Figure 16. Breakdown of Latin American construction pipeline by sector and value Total project pipeline estimated at USD842bn 1.6% Commercial 6.2% Other 93.4% Industrial 0.7% Healthcare 0.1% Residential Source: BMI 39.6% Energy and Utilities 42.9% Transport Source: BMI 22

23 Middle East Handbook 2017 AECOM Europe The European construction market shows positive signs of expansion in the short to medium term, supported by positive economic outputs in the representing countries. Low oil prices, favourable exchange rates and the European Central Banks quantitative easing policy have all contributed to this trend. Activity within the construction sector in Europe has been positive overall, with an increase recorded in the seasonally adjusted construction production index and the construction hours worked index since mid Both measures indicate an upward tick in construction output. Figure 18. Seasonally adjusted construction production index Figure 19. Seasonally adjusted construction hours worked index Index, 2010= Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q Index, 2010= Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q Euro Area EU Germany Italy UK Euro Area EU Germany Italy UK Source: Eurostat Source: Eurostat 23

24 AECOM Middle East Handbook 2017 The overall average of the Euro Area (EA) was subdued in comparison with the European Union (EU) average due to the weak performance of a number of countries, including Italy which historically has represented one of the top five construction markets in Europe. The EU average is more inclusive and the positive performance of the largest European construction market, the U.K., as well as strong performance in Sweden and Denmark has helped balance the downward pressure of underperforming countries such as Italy. Positive demographic trends, improving market sentiments and availability of EU structural funds are expected to boost construction activity in the near to medium forecast. Figure 20. Growth forecasts for the largest 5 European construction markets % change y-o-y f 2018f 2019f Source: Euroconstruct France Germany Italy Spain UK Note: - Euro Area, 19 countries: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia and Spain - European Union, 28 countries: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, UK 24

25 Middle East Handbook 2017 AECOM Africa The African construction market is driven by strong domestic demand and large infrastructure gaps. Performance within the market however varies significantly depending on government funding and attractiveness to foreign investments. Oil exporting countries that have out-performed their counterparts in the past were affected by the low oil prices with Nigeria, the largest construction market, reported a 6% drop in construction output in In comparison Ethiopia, the third largest construction market, grew by 25% in Figure 21. African mega projects Values in USD Billions USD Bn Source: Deloitte Figure 22. Breakdown of mega African projects by region Values in USD Billions 93.4% East Africa 76.1% Central Africa An overall review of mega projects planned in Africa, as reported by Deloitte, shows a drop of about 13.6% in value of projects between 2015 and The drop in foreign investments due to weak global economic growth in 2016 is seen as a major contributor to this trend. Upturns in global economic output, stabilization of oil prices and improvements in market sentiment is hoped to support both domestic and foreign investments in construction projects in the short to medium term. Foreign direct investment for many construction projects is also likely to be influenced by a number of key elections in the region (including those in Kenya, Rwanda, Zambia, DRC, Liberia and Angola). Transport, energy, power and real estate were the main areas of investment in 2016, making up 54% of the investments in mega projects as reported by Deloitte. This trend is expected to continue in 2017 as governments continue to focus on meeting consumers immediate needs and improve countries openness to world trade. Table 2: Top foreign direct investment destinations in Africa by value of Investment, 2016 Destination Value (USD Bn) Main recipient sectors Egypt 10.1 Real estate, oil, gas, alternative / renewable energy Morocco 4.9 Alternative / renewable energy, real estate, automotive Angola 4.4 Oil, gas, communication, transportation Ghana 3.6 Oil, financial services, construction Mozambique 3.4 Transport, coal, gas, real estate Ethiopia 2.7 Chemicals, real estate, textiles South Africa 2.8 Coal, oil, gas, transportation, automotive Source: African Development Bank 27.4% West Africa 7.0% Southern Africa Source: Deloitte 119.8% North Africa 25

26 Midfield Terminal Complex, Abu Dhabi, UAE Set to become Abu Dhabi s new airline hub, Midfield Terminal will expand travel operations in Abu Dhabi by doubling the number of passengers landing in the capital. Developed to further Abu Dhabi s 2030 vision of increasing tourism in the region, the new terminal will welcome around 30 million passengers a year.

27 Middle East Handbook 2017 AECOM MENA economic review Volatility of global trade markets, uncertainties surrounding monetary and fiscal policies, political unrest and vulnerable market sentiments are all key factors affecting the Middle East and North Africa (MENA) economic outlook. The region s performance in 2016 was mixed with Iran and Iraq reporting significant growths and the GCC significant falls in economic output. This varied performance trend is expected to continue in however with greater pressure from downward risks surrounding monetary and fiscal policies. The IMF reported an increase of 3.8% in economic activity in MENA in 2016 compared with 2.6% in However a closer look at the data reveals that this increase is primarily driven by improvements in non-gcc oil exporting markets with Iran and Iraq both reporting growths of 6.5% and 10% in 2016 respectively. Excluding Iran and Iraq reflects a similar growth performance in MENA as recorded in the global markets with GCC countries reporting the most significant drop, 2% growth in 2016 compared to 3.8% in The region s outlook for is dependent on many factors namely stabilization of oil prices, countries ability to move forward with planned fiscal adjustment policies and actions taken to strengthen the non-oil sector. Table 3: Real GDP (annual growth %) Economy f 2018f MENA MENA Oil exporters Gulf Cooperation Council Non-GCC oil exporters Oil importers Source: IMF MENA oil exporters: Algeria, Bahrain, Iran, Iraq, Kuwait, Libya, Oman, Qatar, Saudi Arabia, the UAE, and Yemen. GCC countries: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and UAE. Non-GCC oil exporters: Algeria, Iran, Iraq, Libya, and Yemen. Oil importers: Afghanistan, Djibouti, Egypt, Jordan, Lebanon, Mauritania, Morocco, Pakistan, Sudan, Syria, and Tunisia 27

28 AECOM Middle East Handbook 2017 OPEC+ Agreement The region is highly susceptible to fluctuations in oil prices as the top performers historically; the GCC countries are heavily dependent on oil revenues and many of the oil importers within the region depend on investments and aid funds from the GCC. To improve oil prices, the OPEC+ agreement was reached by OPEC oil producers and non-opec oil producers in late 2016 to reduce world oil production by 1.8 million barrels per day. The reduction in supply helped support higher oil prices since the agreement s enforcement in January In May 2017, OPEC further agreed to maintain the oil supply cuts until the first quarter of Countries compliance with the agreement is key to its success. In the last OPEC+ Monitoring Committee meeting held in July 2017 in Russia, compliance was estimated at 98% until June, and countries were urged to comply fully to help achieve the 100% compliance goal. Within the Committee a recommendation was also made to further increase the duration of the agreement if needed to support higher oil prices. Fiscal adjustment policies The fiscal balance of economies within the region has been negative since 2014 with the exception of GCC countries where their fiscal balance turned negative in Fiscal deficits reflect a discrepancy between government spending and income, with government spending exceeding income generated. Persistent deficits signal a need for governments to review their economic development plans and to find ways to make them more resilient. Across the MENA region, countries are pursuing fiscal adjustment policies to reduce their fiscal deficits and to diversify their economic development plans. Reducing government spending and/or increasing taxation revenues are measures being taken by MENA governments. Figure 23. Overall fiscal balance Percentage of GDP % of GDP Average e 2017f 2018f Source: IMF MENA Non-GCC oil exporters MENA oil exporters Oil importers GCC 28

29 Middle East Handbook 2017 AECOM Reducing Government spending In 2016 government spending on energy subsidies, infrastructure projects and civil workers benefits decreased as a number of countries including Algeria, Oman, Qatar, Saudi Arabia and the UAE tried to improve their fiscal standings. While public spending controls are expected to ease slightly within the region in , the austerity trend is expected to continue in the shortmedium term. Increasing Government revenue To boost governments revenues, countries have amended and / or introduced new tax and customs laws. The paragraphs below summarize key changes (to be) implemented. Value added tax (VAT), tax on consumption of goods and services that is to be borne by the end-user, is to be implemented across the GCC during Saudi Arabia and the UAE have both announced plans to enforce the new tax system by January 2018 while the remaining GCC countries are yet to announce dates within The new tax framework, set as 5% is expected to increase GDP within the GCC by 1-1.5%. Excise tax, tax on specific goods is expected to be implemented by the end of 2017 in the GCC. The tax will likely be added to the prices of tobacco, alcohol, energy and soft drinks and can reach up to 100% of the products original price. Expatriate fees, fees associated with employing expatriates are applicable to all expatriates and their dependents residing in Saudi Arabia and are set depending on the percentage of expatriates hired in each firm. Firms with a higher percentage of Saudi employees will pay less than SAR 100 per expatriate employee while those with a higher percentage of expatriates will pay SAR 400 per expatriate employee. Fees for dependents of expatriates living in Saudi Arabia are set at SAR 100 per dependent. The fees are to be paid monthly and are set to increase until Customs tariffs on highly consumed products in Saudi Arabia are expected to increase in the near term. Products including foods & beverages, fertilizers, chemicals, consumer products and building materials will be subject to new custom rates ranging from 6% to 25% depending on the product. Corporate income tax (CIT) has been increased in Oman from 12% to 15%. Corporate tax in Oman will now also include Omani proprietorships and LLCs but at a rate of 3% tax. Companies in Oman operating in the industrial (manufacturing) sector are the only ones eligible for an initial 5 year (nonrenewable) tax exemption. With holding tax (WHT) in Oman has been extended to include interest, dividends and payments of services. The tax rate is set at 10% and is effective as of the 27th of February

30 AECOM Middle East Handbook 2017 Diversifying income streams Governments across MENA are working on diversifying their revenue streams and strengthening their non-oil sectors where applicable. While fiscal tightening policies might limit government spending within the economies, investments in strategic sectors are expected to move ahead particularly around expanding industrial sector and improving infrastructure. Governments are also looking at revising legislation surround private and foreign investments to make them more attractive and to help alleviate pressures on local governments. Many GCC countries have pursued the sale of Islamic bonds (sukuk) to increase their government s revenues and lower budget deficits. In July 2017, Saudi Arabia issued its first round of local sukuk and successfully raised USD 4.53 billion. Revenue of local sukuk sales further add to Saudi Arabia s revenue from the sale of international bonds which it has been actioning since mid Financing through the sale of sukuk is expected to increase in the region. The World Bank Ease of Doing Business measure is frequently used to assess the attractiveness of the economies for investors and entrepreneurs. The 2017 Ease of Doing Business survey results reflected significant changes in the MENA region with countries reported to have implemented 35 reform policies to improve business environment conditions. Reforms ranged from reducing capital requirements to start a business, to passing legislation to protect minority investors (refer to Table 4 for details). The UAE reported the most significant jump in ranking, from 34th place in 2016 to 26th in The UAE also scored the highest within the overall MENA region. Meydan ONE, Dubai, UAE 30

31 Middle East Handbook 2017 AECOM Table 4: Key reforms In MENA Economy Bahrain Egypt Iraq Jordan Kuwait Morocco Oman Qatar Saudi Arabia UAE Reform Bahrain improved access to credit information by guaranteeing by law borrowers right to inspect their own data. Bahrain made starting a business easier by reducing the minimum capital requirement. Bahrain made exporting easier by improving infrastructure and streamlining procedures at the King Fahad Causeway. Egypt made starting a business easier by merging procedures at the one-stop shop by introducing a follow-up unit in charge of liaising with the tax and labor authority on behalf of the company. Egypt made trading across borders more diffcult by making the process of obtaining and processing documents more complex and by imposing a cap on foreign exchange deposits and withdrawals for imports. Egypt strengthened minority investor protections by increasing shareholder rights and role in major corporate decisions and by clarifying ownership and control structures. Iraq made dealing with construction permits easier by allowing the simultaneous processing of utility clearances and buildings permit applications. The Ministry of Electricity made getting electricity faster by enforcing tighter deadlines on electricity connections Jordan made exporting and importing easier by streamlining customs clearance processes, advancing the use of a single window and improving infrastructure at the Aqaba customs and port. Jordan made paying taxes less costly by increasing the depreciation rates for some fixed assets. Kuwait made starting a business more diffcult by increasing the time required to register by requiring companies to submit the original documents online and in person. Kuwait made exporting and importing easier by introducing customs e-links and electronic exchange of information among various agencies. In Morocco the credit bureau began to provide credit scores. Morocco strengthened minority investor protections by clarifying ownership and control structures and by requiring greater corporate transparency. Morocco made registering property easier by streamlining the property registration process. Morocco made the process of starting a business easier by introducing an online platform to reserve the company name and reducing registration fees. Morocco made trading across borders easier by further developing its single window system and thus reducing border compliance time for importing. Oman made starting a business easier by removing the requirement to pay the minimum capital within three months of incorporation and streamlining the registration of employees. Oman reduced the time for border and documentary compliance by introducing a new online single window/one stop service that allows for fast electronic clearance of goods. Qatar weakened minority investor protections by decreasing the rights of shareholders in major decisions, by diminishing ownership and control structures, by reducing requirements for approval of related-party transactions and their disclosure to the board of directors, and by limiting the liability of interested directors and board of directors in the event of prejudicial related-party transactions. Qatar made registering property easier by increasing the transparency at its land registry. Qatar made starting a business easier by abolishing the paid in minimum capital requirement for limited liability companies. Saudi Arabia increased the length of the notice period for redundancy dismissals. Saudi Arabia strengthened minority investor protections by strengthening ownership and control structures of companies and by increasing corporate transparency requirements. Saudi Arabia made starting a business easier by reducing the time to notarize a company's article of association. Saudi Arabia made paying taxes more diffcult by introducing a more complex income tax return. The UAE made dealing with construction permits easier by implementing risk-based inspections and merging the final inspection into the process of obtaining a completion certificate. The UAE reduced the duration of a single fixed-term contract from 48 to 24 month. The UAE reduced the time required to obtain a new electricity connection by implementing a new program with strict deadlines for reviewing applications, carrying out inspections and meter installations. The United Arab Emirates also introduced compensation for power outages. The UAE strengthened minority investor protections by increasing shareholder rights and role in major corporate decisions, clarifying ownership and control structures, and requiring greater corporate transparency. The UAE made registering property easier by increasing the transparency at its land registry. The UAE made it easier to start a business by streamlining name reservation and articles of association notarization and merging registration procedures with the Ministry of Human Resources and General Pensions and Social Security Authority Source: World Bank 31

32 AECOM Middle East Handbook 2017 Table 5: Ease of business ranking Economy World Ranking MENA Ranking UAE 26 1 Figure 24. Ease of doing business indicators of selected MENA markets Lower values, indicate more favourable conditions Bahrain 63 2 Oman 66 3 Morocco 68 4 Malta 76 5 Tunisia 77 6 Qatar 83 7 Saudi Arabia 94 8 Kuwait Jordan Iran Egypt Lebanon West Bank and Gaza Algeria Iraq Djibouti Syria Yemen Libya Source: World Bank Enforcing Contracts Source: World Bank 20 Getting Credit 20 Starting a Business Egypt 4 Iraq 20 Qatar 20 Registering Property Dealing with Construction Permits Saudi Arabia UAE With the careful enforcement of the fiscal adjustments planned and the anticipated improvements in oil revenues, growth in the non-oil sector is expected to improve in the short-medium term. The IMF estimates the non-oil sector in MENA to grow by 2.9% and 2.7% in 2017 and 2018 respectively, a significant improvement from the 0.7% and 0.4% growth rates recorded in 2015 and 2016 respectively. Table 6: Real GDP non-oil growth (annual growth %) Economy MENA Oil exporters Gulf Cooperation Council Non-GCC oil exporters Source: World Bank 32

33 Middle East Handbook 2017 AECOM Economic impacts of Qatar s diplomatic situation On 5 June 2017, Saudi Arabia, UAE, Bahrain and Egypt closed all their land, sea and air routes with Qatar. Since then, the diplomatic situation has shown little progress with some analysts describing the status quo as a regional cold war. There are fears that Qatar will lose its GCC membership should the situation deteriorate further. Diplomatic issues aside, the economic impact of the severed diplomatic ties is multifaceted and diffcult to assess. Since June 5, Qatar imports dropped significantly as the country tried to shift its trade focus from its GCC counterparts to other regional markets. Qatar is reported to have strengthened its ties with Turkey and Iran since then and has re-routed many of its imports and exports through Oman which remains neutral in the regional situation. Energy trade however remains unchanged, with Qatar continuing to supply the UAE with natural gas. Qatar s construction market continues to be busy with the country planning on awarding many large contracts this year, including the Doha Metro Green Line. The country remains focused on preparing and delivering the needed infrastructure for the football World Cup 2022 to be held in Qatar. Contractors have raised concerns noting that many of the new tenders require contractors to bear the cost of risks associated with importing the required materials. The inclusion of this risk clause could potentially result in a significant increase in tender prices. Other possible economic impacts include downward risks on investor sentiment and oil prices. Qatar is part of OPEC, should Qatar choose not to renew its commitment to OPEC+ agreement in November this year, there are chances that the agreement will not hold and oil prices will drop. The period of resolving the situation is unclear, however international diplomatic efforts, particularly by the U.S. and Europe are underway to facilitate a solution. 33

34 AECOM Middle East Handbook 2017 Risks and challenges The new economic environment of reduced oil revenues, growing government deficits and rising geopolitical tensions pose significant risks to the region s economic development outlook. Volatility of oil prices: The OPEC+ agreement is a significant achievement and plays a significant role in stabilizing global oil prices. However the success of the agreement does depend on compliance of the countries involved in reducing their outputs and the length of its enforcement. Should the agreement expire before global demand increases, oil prices could decrease to lower levels than the estimated USD / barrel currently forecasted for Fiscal adjustments implementation: The fiscal tightening policies announced by the various governments to reduce their deficits limit growth of the non-oil sector as public spending is reduced. The ability of the private sector to bridge the gap in public spending is sensitive to investor s ability to conform with the new tax and expatriate fee regulations. Employment pressures: The reduction in government spending constraints public employment growth and increases pressure on the private sector to absorb new market entrants. This increases downward pressure on wages and can contribute to lower consumer confidence. Market sentiments; A significant contributor to the attractiveness of the GCC countries has been the absence of extensive taxing regulations. With the introduction of the new taxation policies, downward risk on market sentiment increases, particularly if the implementation process is seen by investors and corporations as complicated and ineffcient. Geopolitical risks: Continued conflicts in Syria, Iraq and Yemen weigh in on the region s performance as countries income is further strained to meet aid and defence requirements. The resolution of rising political tension between GCC countries further impacts market sentiments. Strong underlying demand: Providing the population with much needed residential, social and transport infrastructure remains as a high priority for many governments. Governments ability to redirect spending from subsidies to infrastructure development is an upward risk that can help balance many of the negative risks within the market. 34

35 Middle East Handbook 2017 AECOM MENA construction market MENA is frequently cited as one of the most attractive construction markets as it is driven by real economic and demographic needs. However, as is the case with the global markets, the MENA construction market did feel the burden of the global slowdown in economic growth with many projects reported to have been reprioritized, put on hold or cancelled. According to MEED the GCC construction market awards decreased significantly in 2016 to around USD 120 billion compared to 2015 awards of almost USD 200 billion. Kuwait, Oman, Qatar and Saudi Arabia saw project awards decrease by almost 50% in 2016, while UAE reported a more modest decrease. Bahrain was the only region where project awards in 2016 surpassed Low oil prices and burden of regional wars is frequently reported as key factors in this decline. Forecasts for 2017 are cautiously more optimistic than It is hoped that the stability of oil prices, improvements in governments finances and increased private investments will help move many of the projects planned forward. BMI estimates the project pipeline for MENA to be around USD 1.6 trillion, the largest and fastest growing in the world. The UAE has the largest project pipeline estimated at USD 427 billion followed by Saudi Arabia at USD 328 billion and Egypt at USD 160 billion. Figure 25. GCC project awards, f Lower values, indicate more favourable conditions USD Bn Source: MEED Bahrain Kuwait Oman Qatar Saudi UAE GCC Total Figure 26. MENA - Top project countries Pipeline as of Jun 2017, BMI Total pipeline value = USD 1.6 trillion 43% Other e 2017f 27% UAE 10% Egypt Source: BMI 20% Saudi Arabia 35

36 AECOM Middle East Handbook 2017 Connectivity with regional and global markets as well as logistic capacity projects are high on governments agendas as they play an important role in advancing the countries economic development. BMI estimates that transport projects account for USD 458 billion of the region s project pipeline. Investments in transport include strategic ports, airports, rail and other ground transportation channels. Growing population and urbanization further drive the demand for investments in roads, bridges and mass transit. Economic growth goals are also a key driver for construction within the commercial sector, to attract private investors and raise countries profiles as commercial and tourist hubs. The UAE is expected to lead within the commercial sector with a number of mega projects announced in retail and the country continues to prepare for Expo Figure 27. MENA - Share of current project pipeline value by sector Pipeline as of Jun 2017, BMI Mixed-use developments are becoming increasingly popular in the region as developers aim to marry economic needs with requirements to meet the strong demographic demands for varied residential options. Mixed-use developments are also growing in scale, with developers announcing plans to develop cities including most New Capital City and New Alamein City in Egypt. Energy and utilities are estimated to account for about 15% of the region s project pipeline. Power and transmission make up the majority of the investment in this sector to support demand within the industrial sector and the growing population needs. Renewable energy projects and nuclear power projects are also key investments currently being pursued by governments in the region. In addition to meeting sustainability goals, the diversification of power sources is noted to be partly due to governments plans to decrease their dependence on hydrocarbons within their local markets and in turn increase volume of hydrocarbons available for export. 8% Other 12% Industrial 29% Transport Investments in the industrial sector further remain as a target for MENA to diversify their economies particularly through manufacturing and light industry investments. BMI estimates current industrial projects to account for 13% of the regions project pipeline. 15% Residential 15% Energy & Utilities 20% Commercial Source: BMI 36

37 Middle East Handbook 2017 AECOM UAE to outperform regional counterparts The UAE is seen by many investors as one of the most attractive countries in the world. BMI estimates that the UAE construction industry will grow at an average rate of 6% between 2017 and 2020 before slowing down to grow at a rate of 4.6% between 2021 and With the improvement of public funds from tax revenue and lower energy subsidies, public project awards are anticipated to become swifter and overall market sentiment to improve. The UAE remains focused on meeting its growing population demands and preparing for Expo A significant portion of the projects in the pipeline are related to the delivery of Expo 2020 estimated at USD 3 billion to be awarded in Iconic regional projects are also in the pipeline, world s biggest mall planned to be developed at Dubai Creek Harbor (USD 4-5 billion), Burj 2020 District Tower (USD 270 million). Figure 28. UAE construction sector growth forecast (2017f-2026f) Source: BMI 37

38 AECOM Middle East Handbook 2017 Market pricing Uncertainty about global commodity demand, oil price movements and geopolitical risks make it diffcult to identify a clear trend in market prices within the region. In basic economic terms, market prices are driven by two main factors, demand and supply. However, the multitudes of variables affecting each factor make market pricing trends more complex and commonly scenario based. Three broad scenarios are possible within the near-medium term, with degree of variation between each anticipated to be small. In all the scenarios considered, it is assumed that the underlying driver for the development is real economic and demographic growth. Scenario 1 Positive economic outlook, higher demand / Higher selective market pricing Figure 29. Market pricing scenario 1 The project pipeline within the MENA region is estimated to be around USD 1.6 trillion (BMI), however the timing and realization of these projects is key in determining changes in market prices. Should all the projects announced progress as planned, supported by higher oil prices and improved government funding, consultant s and contractors would be able to increase their prices and will likely be more selective in their choice of projects pursued. Increases in commodity prices as a result of global economic growth and regional market demands would put upward pressure on tender prices. Furthermore, lack of design completeness, an increase in project complexity and unclear taxation policies will potentially cause an uptick in prices as consultants and contractors increase risk-based contingency fees. Demand Project Funding Oil Prices Development Priority Design Completeness Project Complexity +2-3 % Supply Commodity Prices Supply chain capacity Ease of Taxation 38

39 Middle East Handbook 2017 AECOM Scenario 2 Stable outlook, improved demand / Marginal increase in market prices Figure 30. Market pricing scenario 2 Stable oil prices, improved market sentiment and increased private funding could support a stronger project pipeline compared to High profile and prioritized development projects are considered as key drivers of demand in this scenario. Stable commodity prices and ability of consultants and contractors to meet project requirements will help increase prices marginally. Design completeness and clarity of taxation policies will also impact prices, causing a further increase depending of level of risk assessed. Demand Project Funding Oil Prices Development Priority Design Completeness Project Complexity +1-2 % Supply Commodity Prices Supply chain capacity Ease of Taxation Scenario 3 Challenging economic outlook, weak demand / Highly competitive pricing Figure 31. Market pricing scenario 3 If governments project funding capacity continues to be hindered by lower oil prices and high budget deficits, the project pipeline is expected to remain within the 2016 levels. High profile projects linked to global events are likely to proceed, however other projects will be re-prioritized. There will be increased pressure on consultants and contractors to price competitively despite the potential increase in design and taxation risks noted previously. Demand Project Funding Oil Prices Development Priority Design Completeness Project Complexity +0-1 % Supply Commodity Prices Supply chain capacity Ease of Taxation 39

40 AECOM Middle East Handbook 2017 Risks and challenges Financing, market maturity and geopolitical risks are hindering the growth of the region s construction market. Market risks have also increased in complexity, making mitigation policies and activities more complicated and requiring a multi-stakeholder approach. BMI estimates the overall MENA project risk profile to be 50.1 out of a 100, below the global average of 54.3 making the region s construction projects riskier to invest in compared with the global average. The BMI metric considers three main factors, availability of financing and sophistication of financial markets, ease of doing business and operational effectiveness as well as risks specific to the construction industry, construction costs, maturity of contracts and project timeliness. GCC countries reported the best risk profiles in the region as estimated by BMI. Countries with higher level of unrest and obvious security issues faired the worse. The UAE was noted as the most attractive construction market in the region surpassing Saudi Arabia which prior to the decline of oil prices and the war in Yemen was considered the largest construction market in the region. BMI estimates the UAE will continue to lead the regional construction market until Figure 32. BMI Project risk index scores, 2017 Score out of 100, higher scores reflect more attractive markets Risk Index, Max = Source: BMI Project Risk Index Financing Operation Construction UAE Qatar Bahrain Saudi Arabia Oman Kuwait Table 7: Project risk index Country Project risk index UAE 65.1 Qatar 61.1 Bahrain 60.4 Saudi Arabia 60.2 Oman 59 Kuwait 53.2 Morocco 51.3 Algeria 43 Iraq 33.6 Libya

41 Middle East Handbook 2017 AECOM Financing risks The majority of projects in MENA are considered to be financed by the public sector. BMI estimates the split in project pipeline by developer to be 85% financed by the public sector and 15% from the private sector. Governments are actively working on expanding their income streams to finance the required development projects, however they are also keen to increase private financing with many options being explored including various public-private partnership models, export credit agency guarantees, Islamic Finance structures, government guarantees, multilateral financing, and raising funds at capital markets via construction financing, bridging loans, bonds, etc. A key factor to the success of these measures will be the robustness and speed of legislative reforms and the commitment to an alternative planning and delivery mechanism. Figure 33. MENA - Share of current project pipeline value by developer Pipeline as of Jun 2017, BMI 15% Private Private investments in infrastructure in MENA have decreased in 2016 to USD 1.8 billion down from USD 2.5 billion invested in 2015 as reported by the World Bank. Geopolitical tensions and unrest have been cited as a factor in this decline. However, despite the significant drop, it is hoped that an increase in investments will be recorded in 2017 and 2018 particularly as more comprehensive local legislations are being developed to protect investors and further facilitate the process. Public Private Partnerships (PPP) is seen as one of the most desired alternative financing and procurement frameworks. Apart from the fiscal advantages, PPP promise benefits from more explicit risk sharing between the government and the private sector, and if properly designed, could increase the effciency of procurement and project management. Egypt, Tunisia and Kuwait are considered to have the highest number of PPP projects in the region. 85% Public Source: BMI 41

42 AECOM Middle East Handbook 2017 Operational and construction risks Challenging economic conditions have had a clear impact on the construction market in the region. Reports of disputes between developers, consultants and contractors over contract terms and conditions and payment delays have increased. Anecdotal reports suggest this is particularly true for oil exporting countries where reduced funding and tighter project budgets have challenged the pre-oil crisis delivery process even for iconic projects in the region. Incomplete designs and ambitious project timelines have also been reported as key factors contributing to the rise of contractual disputes. In the absence of complete designs or misalignments between design requirements and project budgets and/or timelines, consultants and contractors issue variations to complete work needed. Anecdotal evidence suggests that resolution of these variations has become more diffcult in the past year with many disputes leading to bank guarantees being called on and final accounts not settled. For many the solution is simple, clearer contracts and design plans that realistically correspond with the secured project budget are needed to minimize variations, avoid disputes and support timely contractual payments. The implementation of such a solution however requires a unified approach from the various stakeholders, financers, developers, consultants and contractors. In the face of tighter market conditions, the various stakeholders in the development process are taking steps to re-structure their organizations and to introduce new checks and balances to their tendering and delivery frameworks. The aim is to make their organizations leaner and more effcient in the new economic climate. 42

43 Middle East Handbook 2017 AECOM 43

44 AECOM Middle East Handbook 2017 Country statistics The table and figures below provide a summary of key macroeconomic statistics Table 8: Country statistics Statistics 2016 Bahrain Egypt Iraq Jordan Kuwait Lebanon Oman Qatar KSA UAE Land Area, km 2 (1) , Capital City Manama Cairo Baghdad Amman Kuwait Beirut Muscat Doha Riyadh Abu Dhabi Population, million (2) Population growth, CAGR (CAGR, %) (2) GDP, USD, billion, current (2) Real GDP growth, % (2) Real GDP growth, pa forecast (2) GDP/Capita (PPP), USD(2) 50,704 12,554 17,944 12,278 71,887 18,525 46, ,660 55,158 67,871 Construction Output, Share in GDP (%) (4) 7.9* 4.8* N/A * 4.5* * * Value of Construction Output, USD, billion 2.5* 13.3* N/A * 2.3* * * Project awards, USD billion (3) 7.6 N/A N/A N/A 33.2 N/A Consumer Price Inflation, % All data are 2016 data unless otherwise stated (1) Source: World Bank (2) Source: IMF, UN Estimate (Lebanon) (3) Source: MEED, Budget value of construction contract awards (4) Value of Construction Output based on National Accounts (*) Estimate only (based on 2015 or partial 2016 data offcial data) 44

45 Middle East Handbook 2017 AECOM Figure 34. Middle East economic growth forecast Figure 35. Share in regional construction market Based on 2015 / 2016 construction output % Oman 2% Lebanon 2% Bahrain 1% Jordan 0% Iraq Annual % % Kuwait 10% Egypt 32% Saudi Arabia 0 Egypt UAE Lebanon Kuwait Jordan Qatar Oman Bahrain Saudi Arabia Iraq 12% Qatar Source: IMF, National Statistics Average GDP growth p.a % UAE Source: BMI 45

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47 Section TWO Articles

48 AECOM Middle East Handbook 2017 Ethiad Towers, Abu Dhabi, UAE 48

49 Middle East Handbook 2017 AECOM Cost model insights: Outlining key design and cost drivers of resilient sectors Despite being burdened with political instability and its susceptibility to regional and global shifts in demand and resources, the MENA construction market is considered one the largest and fastest growing in the world. The market is driven by real economic and social demands that are inelastic and forecasted to be here for the foreseeable future. Infrastructure projects currently dominate the project pipeline as countries move to improve their connectivity with local, regional and international markets. While growth in the infrastructure sector is significant, countries continued and growing focus on a number of few niche markets is noteworthy, particularly in the challenging economic and political environment. Tall towers, private hospitals and data centers are some of the niche construction sectors which have shown resilience in the current economic climate. The articles in this section outline key design and cost drivers that need to be considered when investing in these sectors. 49

50 AECOM Middle East Handbook 2017 Commercial offce towers The number of towers being proposed and developed in the MENA region continues to grow, as does their height. Why are towers so attractive? After all, they take longer to design and build, and can be trickier to construct than other projects. They attract more scrutiny also, and due to the additional scrutiny gaining necessary approval and consents for new tower developments can be tough. Yet done right, a tower can inspire in the way other buildings can t. They can provide a focal point to a skyline, embody aspirations of a masterplan and spearhead regeneration of the surrounding area. The largest commercial towers tend to transcend market cycles. This is perhaps why towers continue to be popular among developers and planning councils alike. Any new tower proposed, whether in an existing or new district, needs to balance between the higher density and effcient use of land they offer against changes to the city s skyline and heritage. Many of the new tower projects are in their early planning and development stages, and others are part of long-term masterplans. Future market conditions will have an impact on the number of towers that actually get built. The largest commercial towers tend to transcend market cycles and the overall development period from inception to completion can be over 10 years, they come under more scrutiny and need the countries planners and politicians backing to proceed. 50

51 Middle East Handbook 2017 AECOM Evolution of the commercial tower The first decade of the 21st century saw a resurgence of tower buildings in MENA, with iconic shapes emerging that helped to remould the skyline of many cities. Now, as tall buildings have become more established, 50 to 70 storeys are becoming the norm for commercial towers in cities like Dubai, however the architectural response in their shape and form is more restrained. Introducing functional shapes and forms keeps costs down, with larger floor plates at higher levels to maximise rental revenues. For towers, the quality of the design is still important. A meter tower in any city in MENA will be a prominent new feature on the skyline and to gain planning consent, a high quality architectural design showing flair and an intelligent response to the heritage of its surrounding area is a must. Design needs to be evaluated across various criteria and incorporate the clients and tenants changing requirements. Large, open-plan floors and plenty of amenity space inside is a typical requirement. Sky lobbies, intermediate floors and roof space are all good for non-core offce use, and can increase the wow" factor and contribute positively to the wellbeing of those working there. The traditional specification standards of BREEAM and LEED still matter, and large commercial towers still need to score well on them. How towers interface with the surrounding area is another area of interest, particularly for planners. External landscaping and improvements to the public realm, as well as amenity space, need to be of exceptional quality. It is important to consider how towers operate at ground level to minimise the impact of a potentially intimidating structure by opening it out where it hits the ground, and even to actively manage wind as it meets the street to maximise the use of external space. 51

52 AECOM Middle East Handbook 2017 Design and cost drivers The biggest cost centres for towers, and those most influenced by design, remain the structure, facades (and their interface) and the MEP services. As tower design evolves the prevailing trends, such as increased structural grids, floor-to-ceiling heights and location of cores, impact the design response. Structure Structural systems for tall buildings are driven by a combination of architectural, economical and site factors. Building form and height is clearly critical, as are the net-to-gross areas. The nature of the site itself will also have an impact. With land values in major MENA cities rising, developers are exploring more challenging sites (infills, tunnels or old industrial land) that may require a more complex structural solution. Structural framing solutions will continue to depend on the building s intended use. In the residential sector, tall buildings are usually concrete framed with flat slabs. This reduces the structural zone and allows floor-to-floor heights to be minimized, providing a more economical design for this sector. In contrast, commercial tall buildings deploy either a composite (steel and concrete) or steel frame. Steel frames allow longer spans than traditional reinforced concrete, giving developers more flexibility in the use of space and enabling column-free floor plates to be provided. With the increased appetite for taller buildings and larger floor plates, braced tubes or bracing on the perimeter are increasingly common. How this is incorporated into the design and its interface with the facade is a key cost driver. Exposing structure and making it an architectural feature can give the design some edge but can be more expensive. Increasing floor-to-ceiling height, without increasing the overall storey heights can be achieved by reducing the structural and services zone within the ceiling. However, this, in combination with the larger spans, will add weight to a steel frame. Another important design trend is the preference for offset cores. They appeal to developers and architects looking for a greater flexibility, adaptability and effciency of floor space. But they pose a greater challenge to structural engineers, as an offset core generates higher torsional forces, which could result in the need for expensive outrigger systems deployed to resist the torsion. Sustainability will be a continuing and growing influence on structural engineers, driven by legislation and central government targets. Developers will need to consider alternative construction techniques and new material technologies in response. Modular systems and off-site fabrication will become more prevalent. Recycled aggregates and high-strength materials will also become more frequently used. Doha Oasis, Doha, Qatar 52

53 Middle East Handbook 2017 AECOM Cladding One of the first studies on a tower scheme is to create a successful facade and define the performance limits. The glazing ratio of the façade will define the look of the building making it look transparent, opaque, solid or light. It is important for the team to ask the question: how do you make the correct architectural decision but balance the requirements for amount of daylight into the building, direct sun exposure, and reduce energy use? There a number of different options: Natural ventilated facades: Double-skin facades have been developed to reduce the heat loads on glass envelopes, with blinds in the cavity. These vary from those with wider cavity to allow for maintenance; principally these work well but are expensive and take up floor space. Slimmer systems are available, typically with a cavity of 150 millimeter but the cavity still needs to be maintained through opening vents, which can be disruptive to tenants. Closed cavity facades: a system that uses compressed dry air to be pumped into the sealed cavity between the two skins, the cavity can only be reached by removing one of the glazing skins. As the blinds in the cavity cannot be accessed once manufactured, blind drive motors are fixed outside the cavity and have a driveshaft penetrating the cavity, connecting them to the blinds. External solar shading: Fixed solar shading on the outside of the tower is an alternative solution to minimize the heat load for MEP services. The overall cladding zone incorporating the shading is wider but if the perimeter structure or bracing is exposed this can create the zone for solar shading. While there are additional costs for the solar shading elements the base cladding system behind can be a simplified and maximise on the economies of scale. High performance double-glazed units: a fully glazed solution using unitised double-glazed units remains a possible solution. It requires enhanced G and U values achieved through high-performance coatings or by increasing the amount of solid cladding on the building. a full-height clear glazed solution will give the benefit of increased daylight but does place additional requirements on the MEP design due to the additional heat loads and sustainability requirements. Kingdom Centre, Riyadh KSA 53

54 AECOM Middle East Handbook 2017 In any solution the buildability requirements of the facade should be considered from the earliest design concept. Services The specification levels, interfaces and distribution are important considerations for the services design. The services strategy should be carefully considered at the outset, as changes later on are diffcult to incorporate. Off-set cores are a major enabler of innovation in services design, allowing options for where plant is located. Individual on-floor plant solutions house principal air handling kit at each level the loss of space on these floors needs to be balanced with the advantage gained from freeing up wider areas at either the midpoint or at the top of the building. Towers developed in financial districts have retained the traditional MEP design allowances to meet the requirements of tenants with higher cooling loads, resilience in services and future flexibility. Exposed services are becoming popular with tenants, particularly those in the technology or media sectors. This is mainly an aesthetic decision and depending on the layout and specification can in fact cost more than a conventional approach. Electrical installation Decisions taken around plantroom location will be critical here. Generally, HV distribution systems are the same as in other commercial offces, but levels of standby generation need to be fully explored. For commercial offce towers, 100% standby generation is often provided; the location is a balance between the use of roof space, which is increasingly valuable for other uses, and location within the basement and building with the acoustic and flue requirements taking up net floor area. Lifts Careful analysis of traffc is required to ensure lift design is fit for purpose. That said towers lead the innovations in this area and features such as destination hall controls, first seen in high-rise buildings, are now common in all. However, lift costs for towers are often two to three times standard building cost. Designers need to strike a balance performance vs occupational density requirements, ease of use and the space taken up by lifts and service core in the overall design. The combination of increased occupational densities and the drive to maximise effciency in space taken by lifts can lead to a solution with sky lobbies and transfer floors to manage user flows. The unique nature of towers brings with it some challenges for service design. Logistics needs to be carefully thought out, and the services program needs to reflect the time it takes to move people and materials around. Due to height of tall buildings, the question of hydraulics and pipe pressures are critical in design terms. Towers need a greater number of pipe risers, with increased pumping requirements and basement distribution. More pipe gauges are needed and the cost of fittings, valves and so on, is higher. Hot water services need to be treated locally, and often hydraulic breaks are required. Developers may also need to evaluate whether PRVs or heat exchangers are more economic. 54

55 Middle East Handbook 2017 AECOM Procurement and construction challenges The construction of towers brings a different set of challenges compared to a lower rise building. Towers are specialized major projects and there are really only a few contractors who have the skilled staff and expertise to deliver them successfully. The more towers under construction in a city, the busier the main contractors will be. Simple demand and supply will result in higher pricing levels. When assessing the risk of delivering a tower, investors and developers need to include how it is viewed by the market. They need good, well-coordinated information to sell the schemes positively to the market. The chosen procurement route needs to reflect all of this. Twostage design and build or construction management contracts are more popular than single-stage agreements. Contractors still favour lump-sum deals but the correct sharing of risks between contractor and developer is essential in the current market. To deliver maximum value to the tall building client it is essential to engage with trade and main contractor s advice is sought and inputted into the design process at an early stage. This allows the contractors expertise to be designed in, and waste and ineffciencies to be designed out early, when most value can be created. Construction Continuous innovation is important in order to stay ahead in construction and tall buildings are seen as the test bed of the construction industry, with innovations trickling down to regular construction projects once proven on tall buildings. The current swath of innovations are across many specialist trades, but all are aimed at reducing the critical path of the construction period. These include: high strength concrete allowing slimmer columns, beams and slabs, quicker curing and striking, hence quicker frame cycle times; high-strength steel allowing slimmer double or triple-storey members and quicker erecting; advancements in jump lifts enabling the early use of lifts in lieu of hoists within weather protected lift shafts by building temporary crash decks and lift motor rooms; advancements in unitised cladding installation methods, speeding up the waterproofing of the tower. Modularisation, or off-site manufacture and assembly, is a very exciting area of construction innovation, potentially offering real productivity benefits to the tall building, if the current glass ceiling of 30 storeys can be broken. The well designed tall building form tends to be inherently modular with simplicity, repetition, standardisation and economies of scale designed in. Modular construction is already viable and even the preferred form of building in some market sectors, but generally remains uncommon in MENA. The key benefits to using modular construction for a tall building include: speed of erection, commissioning and handover; quality, as the product is built in a controlled environment yielding higher productivity and quality; safety, as less time is needed on site and working at height; sustainability, due to better thermal and acoustic performance along with reduced waste; innovation, in the form of increased prototyping, and factory testing of new technology effectively derisks the on-site use of the new tech. These are all very desirable benefits when building a tall building, but there are key construction challenges to be overcome: planning the logistics route of modular units from factory to site, adhering to articulated lorry standard sizes and avoiding low bridges; tower crane selection will need upsizing in both load and reach capacity; site layout needs to allow clear material handling areas to lift the modules directly off the back of the vehicles, necessitating the use of just-in-time deliveries and out-of-town consolidation centre to ensure exact timing of each module delivery, minimising congestion of city centre roads around the tall building and maximizing hook-time effciency. There is also the risk that the modular industry is small and predominantly based in central Europe and Asia with very limited supply in MENA. This makes procurement and performance risky. The tall building principal contractor may also be nervous about having such a strong dependence on a single source determining the success or failure of their high-profile tall building project. 55

56 AECOM Middle East Handbook 2017 Utilities The requirements and size of incoming supplies for a new commercial tower need planning and implementing at an early stage of its development and it is advisable to engage with the statutory utilities at the earliest opportunity. Of particular importance is early engagement with local power networks, the incumbent electrical distribution network operator. Electrical connections in cities have to be planned well in advance as it is common for the point of connection for a power supply to be a fair distance away from the point of use. To install cabling through the streets of busy cities requires planning in advance and can be very expensive to deliver. Due to their size commercial offce tower developments are connected at 33,000 volts. This has an effect on the overall connection arrangement; cost with the transformer provisions are much larger within the buildings itself and the capital cost is significantly higher. DAMAC Heights, Dubai, UAE Commercial vs residential towers A typical commercial tower completed to shell and core is around 50% more expensive than a residential scheme. This is a result of the difference in key design aspects of residential and commercial towers. Floor plate design is undertaken to optimize effciencies, the floor plate size on a residential tower is around square meters. The final size depends on the mix and size of units included to suit the target market. Smaller floor plates work with a central core, as can larger multi-core floor plates, but normally at the expense of overall net-to-gross and wall-to-floor ratio effciencies. For the same reasons the minimum average offce floor plate is normally around 1,500 square meters. Structure residential schemes tend to be all-concrete structures for acoustic reasons. Post-tensioned slabs can also be considered, as lower slab thickness and storey height can provide an additional floor in the overall height of the building. These need to be factored against buildability issues and the ability to fix layouts as early as possible. Offces tend to be constructed in steelwork combined with a concrete core to give greater spans and column-free space to the floor plate. The use of the facade as part of the apartment on residential schemes results in the need to incorporate balconies or winter gardens, which requires additional detailing, along with double-aspect apartments for schemes of higher value. The fit-out cost of residential schemes is closely linked to the set sales values. For this reason, there is a big range in the specification and cost of a residential fit-out. Conversely, commercial schemes are normally completed to shell and core, with a cost to category fit-out on a few typical floors, and the final fit-out works undertaken by the tenant. 56

57 Middle East Handbook 2017 AECOM Cost model There is a wide range of pricing for commercial offce towers, when measured on a USD/m 2 basis over the gross floor area. Shell and core prices can range greatly. This range is primarily influenced by the architectural response to a site and its interface with the required structural solution, followed by overall specification levels and then height. The cost model in the graphic below summarises the shell and core cost of a notional landmark tower in a major city. It has a gross floor area of 110,000 square meters over 61 floors above ground and three basements. It has an overall net-to-gross ratio of 68% and a wall-to-floor ratio of Ceiling finishes 0.60% Floor finishes 1.30% Wall finishes 1.80% Internal doors 1.10% Internal walls and partitions 2.70% Windows and external doors 0.01% External walls 13.70% The model reflects element cost breakdown obtained from a competitive tender through a two-stage tender process, converted to a lump sum. The cost model includes all main contractor preliminaries, fees and risk allowance to complete the building to a shell and core status. Demolition, enabling works, external works, external services, category A fit out, tenant enhancement, professional fees and VAT are excluded % Fittings / Fit-out (excluding loose furniture) 0.40% Sanitary appliances 5.30% Electrical installations 5.80% Lifts and escalators 1.10% Protective installations 1.30% Communications installation 0.60% Disposal installations 0.80% Water installations Stairs 0.70% Roof 0.30% Upper floor 3.70% Average cost per sqm in GCC ranges between USD 1,580 and USD 2,140* 4.20% Space cooling and air treatment 0.80% Ventilation installations 0.70% Special installations 1.00% Builders works 0.91% Testing and commissioning Frame 16.20% 26.1% Preliminaries Substructure 6.40% * Refer to the regional building cost comparisons table in Section 4 for a sample of hospital cost per square meter comparison across the GCC. Key 0.00% Percent of Total Cost 57

58 AECOM Private hospitals Middle East Handbook 2017 Within the consultation process, it is best practice to embed the principle that buildings are about people, the end users. It is not uncommon to find contract variations or a small works package being undertaken following completion of a project in tailoring to specific needs. It is therefore pivotal to continuously test and challenge the development of the brief and the design response, to assist in delivering what is needed. In hospitals, understanding clinicians individual approaches, treatment timetables and shared service spaces will help to deliver better occupancy rates and, consequently, reduce costs. In fact, many providers are adding metering to existing accommodation in order to track and report on both occupancy and energy usage knowledge that can be used for future developments. Clemenceau Medical Centre, Dubai, UAE 58

59 Middle East Handbook 2017 AECOM Design and cost drivers Specification The heightened focus on brand identity differentiates private from public healthcare. In selling the brand to the consumer and clinicians, private providers want to be seen as unique, offering consistent positive experiences to patients and their families in terms of product, service and care. Given the importance of marketing, the vast majority of private healthcare providers already have the building design and specification prescribed in detail within a brand book. Whether a patient is in Muscat or Dubai, their built environment will not differ. The expectation then follows that neither will the service. The focus is therefore to produce a conceptual model that can be used and adapted on future projects, irrespective of location, in order to promote one identity. Compliance A private healthcare provider has relative freedom in design, as long as it meets the national quality and safety standards set by the relevant authority. Traditionally for healthcare, in order to deliver functionality of service and ease of maintenance, the response has been rather clinical and utilitarian. Through better understanding of balancing consumer preferences with patient risk, private healthcare accommodation is becoming far more flexible; indeed the current trend in design is mirroring the hotel market. Enhanced flexibility in design will naturally make it easier to integrate innovation. This is important for private healthcare providers, which need to adapt to meet the changing demands of their clinicians and consumers. Patient environment The design of healthcare facilities that promote wellness and aid healing is not a new consideration, but one that has evolved. Health studies undertaken in the 1970s and 1980s correlated patient environment with wellbeing and with shortening patient recovery. Only recently, Florence Nightingale s notes on nursing, advising that fresh air from an open window assists in good health, have been proven to be correct. Now all healthcare providers are seeking to create therapeutic spaces by emphasising design criteria such as daylight, natural ventilation, views to the outside, wayfinding, quietness, social support, distraction, freedom of movement, art and music. Integrated services Hospitals are among the most heavily serviced types of building. Operating 24 hours a day, these facilities incur high operational and maintenance costs, and careful attention needs to be given to the planning and integration of services within the overall building. Early focus on issues such as the optimum sizing and location of plant rooms, services zones and risers can pay real dividends. It will not only reduce construction costs but will also have a beneficial financial impact on operation and maintenance. Similarly, the drive to create attractive surroundings for patients means that aesthetics are very important. Integrated bedhead trunking systems combining power, data, medical gases and lighting are readily available and provide a concealed solution for dealing with multiple services. More importantly, they can be cleaned easily, helping to reduce the risk of infection. Technological advancements It is diffcult to accurately forecast future needs and the fear of technical obsolescence can lead to an overprovision of services plant and equipment. However, designing for adaptability at the outset does not need to cost a great deal. Ensuring that plant areas are accessible, service routes are safeguarded and risers can be modified or expanded easily is vital and will make future modifications relatively straightforward. Advances in lighting and wireless technology may in any event reduce rather than increase riser sizes and containment systems. In fact, the use of the television is starting to play a much greater role in service integration. The smart TV has now been developed to incorporate patient controlled applications including air conditioning, lighting, blinds, patient information, nurse calls and telephones. 59

60 AECOM Middle East Handbook 2017 In terms of front of house, although only equating to a small proportion of the overall building area, the entrance and reception is the public face of the provider. Patients are increasingly considered as guests or clients, so a large welcoming entrance and lobby with high-quality finishes and furnishings matching the provider s image is an important design consideration. Those new to the market will consider a high-profile building, spending a premium through the design response, one of the factors which will drive total construction cost up from a minimum benchmark. Brand identity Where there is a personal and emotional connection between a company and its customers, as there is when dealing with one s health, the values associated with the brand (compassion, professional, responsive and so on) are of increasing importance. Integrating the provider s desired identity and values within the design of the building will create further opportunities for increasing patient satisfaction and ultimately greater customer loyalty. Design standards Private health design is typically based on a national health department guidance document, providing valuable input into factors such as space standards. Some private providers will look to challenge these area recommendations and some may over provide. Accommodation A higher theatre-to-bed ratio will increase cost per square metre, given the higher cost of theatre space and greater concentration of engineering services and equipment. Using the United Kingdom as a benchmark, typically there are 15 beds per theatre; any increase in this ratio can assist operational income, but this must be matched with the demand. A safer design solution is to ensure that there is an appropriately sized theatre recovery area. Single beds There has been a sustained trend for single bedrooms within healthcare. With patients paying directly for their treatment there is a heightened expectation of a quality environment. From an operational perspective, single-bedded rooms omit the need to balance accommodation according to patient gender, and evidence indicates that this can help to reduce patient stay and cross contamination / infection. The model of patient care still takes precedent for example, where greater patient observation is required, the number of beds to a room may need to be increased. Layout In the UK the mean range in size of a single bedroom, including en-suite, is square meters. A single corridor with bedrooms either side gives optimum area and operational effciency. A newbuild ward, typically encompassing staff base, clean-and-dirty utility space, pantry, WC and assisted bathroom, storage, access and risers, equates to square meters per bed. With the constraints in refurbishing, whether an older hospital or a building conversion, this can rise to 55 square meters per bed. Flexibility There are numerous arrangements within a building that can offer private providers the opportunity to adapt their income stream. For instance, designing an enlarged treatment room so that it can also be used for physiotherapy, or vice versa, will mean a healthcare provider can easily change its operations. Another example is the introduction of interlocking access between bedrooms, which can allow a family member to stay in the adjacent room to the patient, removing the visiting hour constraint. 60

61 Middle East Handbook 2017 AECOM CMC Dubai, UAE Engineering services Hospitals are significant users of energy and are natural candidates for sustainable design. Designing for natural ventilation and daylighting are important. Where possible, services should be designed on a simple modular basis, which are easily accessible and expandable. Locating major plant close to energy-hungry areas, such as operating theatres, is also important. Ensuring reliability of supply and standby facilities is another key factor. Specialist services Early input in specialist systems design is important. For example, the experience and advice of a nurse call specialist can significantly affect the planning and location of some hospital functions. Growing sophistication in diagnostics and patient entertainment systems, as Early input in specialist systems design is important. For example, the experience and advice of a nurse call specialist can significantly affect the planning and location of some hospital functions. Growing sophistication in diagnostics and patient entertainment systems, as well as more local environmental control, is driving a considerable increase in IT requirements. Wireless technology is becoming more prevalent and the use of open protocols for control systems allows the operator greater choice and value from the supply chain. 61

62 AECOM Middle East Handbook 2017 Laboratory integration Incorporating laboratory design within a hospital is not an easy task as there are many factors that need to be considered. Laboratories are designed and constructed to complex criteria. Given that environments need to be kept stable there are high proportions of services to be coordinated and commissioned; compliance with regulatory safety standards must be maintained and resilience of services is needed in the event of any system failure. Use of air Room fabric junctions must be constructed to reduce air leakage, and safety compliance with regulatory requirements is essential. Laboratories commonly need a higher air change rate than normal buildings for safety reasons, while the temperature and humidity controls needed for biological research results in more conditioning of supplied air. Water systems Multiple water systems are often needed, with a standard supply to toilets and hand washing facilities, separate category 5 water supply to laboratory sinks and purified water to laboratory benches and equipment. If the hot water is centrally distributed rather than through point-of-use heaters then this further increases the number of systems. Gases Some laboratories will require the supply of six or more different gases, either from a central source with a reticulated system throughout the laboratory or directly fed to specific rooms or local bottle storage. An assessment should be undertaken to ensure compliance with standards such as the Dangerous substances and Explosive Atmospheres Regulations (DSEAR) in design and occupation. Servicing strategies Plant room spaces can account for more than 15% of the net laboratory floor area. Vertical risers and any interstitial or service corridors will further increase the gross footprint. Selecting the most appropriate overall servicing strategy is essential. This will, both vertically and horizontally, affect the mass and effciency of internal planning. Minimising the services distribution can improve the effciency of the systems, reducing capital and operational costs. Equipment interfaces The density of some equipment items such as fume cupboards and safety cabinets can generate design coordination challenges, such as spatial fit for the dedicated extract systems through the building service zones. Vibration criteria are important in many laboratories. For example, magnetic resonance imaging (MRI) scanners and electron microscopes can be very sensitive to vibration, resulting in a requirement for enhanced structural measures to reduce this or to isolate such equipment from the main structure. Sensitive equipment is sometimes located away from lifts, certain mechanical services plant and, occasionally, nearby roads. Radio frequency shielding around scanner rooms reduces operational disruption. Controlling hazards The work undertaken in some laboratories requires barriers both to the entry and exit of harmful materials. Laboratories also need dedicated highly controlled environmental temperature conditions and pressure regimes. Increased containment levels can result in additional humidity controls, enhanced airtightness, increased air changes per hour, high-effciency particulate air filtration and a higher quality of fabric and finishes. Some laboratories will also require full backup to main mechanical and electrical services to maintain safety and operation and protect research in case of unplanned shutdowns. 62

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64 AECOM Middle East Handbook 2017 Finishes All floor, wall and ceiling finishes must be easy to clean. As the containment level increases they need to create a sealed barrier at all junctions and airtight surfaces to prevent the escape of contaminated pathogens. Wall finishes may become multi-layer applied specialist paints and chemical resistant floor finishes would be used. At the higher containment levels, tiled ceiling systems are replaced with a continuous ceiling construction and all services penetrations are sealed. Security In higher containment level laboratories, the material being used may be classified as a dangerous substance. In these instances reinforced walls, doors, CCTV and access control standards increase, with a consequential impact on the cost. Compliance standards Early identification is essential during the briefing and design process of the appropriate designated personnel within the client organisation for any specialist licensing purposes. This person can work with the design engineers to understand the regulatory requirements for key operational processes, the heating, ventilation, air conditioning and building management systems in particular. Commissioning The commissioning and validation process is vital to the successful occupation of laboratories, whether this is robustness and resilience in mechanical and electrical services or quality of specification and installation of building fabric. The risk around this can be reduced by early appointment of an independent validation engineer to advise during the design stages and work alongside the construction team during installation and commissioning and into operation. Adaptability Laboratories must be futureproofed against expensive adaptation costs. While each has its own initial purpose, allowance must be made for mechanical, electrical and plumbing services beyond the current requirements. Centralising the main services risers, or taking them out of the laboratory space entirely, can leave the internal floor space clear for future adaptation. Adopting generic structural grids and lightweight partitioning can facilitate future layout permutations and minimises disruption. 64

65 Middle East Handbook 2017 AECOM Refurbishment: Option worth considering Clients should always first consider whether it is possible to increase the use of their existing space. Capital outlay on a building is often dwarfed by the associated running costs of a typical year building life. Whatever the sector, reconfiguring existing accommodation, an estate or a portfolio of schemes may negate the need to build new space. The business case for refurbishment will be driven by one or more of the following needs: To ensure business as usual To enhance appearance To implement significant services, infrastructure upgrade or replacement To rebrand To align existing departments with model of care and business case To install, replace or upgrade diagnostic and/or theatre equipment To act on a compliance review such as infection control and hospital policy / audit. The value drivers for a refurbishment project tend to focus on retaining the provision of patient services: Scope: A cosmetic refresh limited to decoration and replacing floor finish can be implemented by a wide variety of contractors and often accommodated with minimal decanting or disruption to the hospital. The work becomes considerably more involved when the refresh requires access to ceilings as it tends to lead to unknown additional scope and the requirement to adjust engineering services. Backlog issues; The opportunity to address inherent backlog issues is when a department is closed. This can include replacement of outdated secondary glazing, new internal doors and frames or whole-scale replacement of systems such as nurse call or fire alarms. Clemenceau Medical Centre (CMC), Amman, Jordan 65

66 AECOM Middle East Handbook 2017 Retrofitting: Refurbishment will allow the opportunity to tidy up the installation of systems that have been installed over various points in time, whether they be IT, data cabling, additional power, fire alarms or nurse call. Compliance: Depending on the age and use of the facility, the installation of medical gases should be considered. Unsightly boxed-in radiators, which are diffcult to clean, could be replaced with low surface temperature radiators. Space: Departmental space planning alterations typically appear straightforward at first glance, but in many cases existing rooms are inappropriately sized for current use. It is therefore important to consider the cost impact on adjoining spaces in finding additional area. Disruption: Within the independent sector, there is a consistent wish for contractors to be neither seen nor heard. the need to clearly define working hours, access restriction, shared building engineering services and acceptable periods of noisy and dusty works are critical. Seasonal work: Limiting the impact on the hospital s business operations is essential and in the case of bedroom refurbishment there are quieter times throughout the year when a larger number of rooms can be made available. All or nothing: In refurbishing patient en-suites it is often diffcult to find a solution that does not involve whole-scale replacement of components and finishes. Understanding of this wider scope of works needs to be established at feasibility stage. Decant strategy: Phasing for a ward refurbishment is complex, and can be on a bedroom-by-bedroom basis. In the case of theatre refurbishment, the cost of a mobile solution to offer continuing revenue will need to be factored in. Works to common areas, such as the entrance, reception, lift lobbies and stairs are often undertaken out of hours, limiting disruption. King Khalid Medical City, Dammam, KSA 66

67 Middle East Handbook 2017 AECOM Cost model The cost model in the graphic below is for a standalone new-build 20-bed private patient ward unit with associated ancillary support services; both internal and external finishes to a good quality. Theatres are provided elsewhere within the hospital estate. The building contains 1,700 square meters gross floor area. Costs exclude external works, professional fees, surveys, VAT and site-specific abnormals. The rates may need to be adjusted to account for specification, site conditions, procurement route and program. 9.58% Substructure Preliminaries 13.13% 1.85% Frame 9.94% Roof Electrical Installations 23.82% Average cost per sqm in GCC ranges between USD 2,200 and USD 2,900* 43.76% External walls, windows and doors 6.17% Internal walls, partitions and doors Mechanical Installations 14.26% 2.49% Wall finishes 2.00% Floor finishes 3.21% Ceiling finishes 3.16% Furniture, fixtures and equipment * Refer to the regional building cost comparisons table in Section 4 for a sample of hospital cost per square meter comparison across the GCC. Key 0.00% Percent of Total Cost 67

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69 Middle East Handbook 2017 AECOM Data centres Demand for data centres continues to reflect the growing and changing needs of a connected world. Internet users are forecast to grow over 17% year-on-year between 2015 and 2018, and internet enabled devices by 27% over the same period this technology is used to access, store and process data, all of which passes through one or more data centres. Data centres provide secure and resilient operating environments for IT equipment, without drawing undue attention to the sensitive nature of their contents. Although essentially industrial buildings, data centres are highly functional and design requirements are changing quickly. Furthermore, an ever increasing need for energy effciency and moves towards cloud-based environments adds complexity to the market for data centres. As the data centre sector matures, the clarity of its landscape has increased, as end-users are better placed to choose between construction of their own data centre or engaging with a third- party provider, whether through colocation, managed or cloud services. These decisions are underpinned by a better understanding of the total cost of ownership over a larger economic time horizon, typically 5-10 years. Institutions and funds are therefore able to invest with greater certainty, as unknown costs are minimised with the right level of management capability. However, this also means that data centres are becoming more commoditised. Competition is fierce as third party and outsourcing organisations strive to lower costs and differentiate themselves from the competition. Total cost of ownership increasingly weighs on decisions to procure and build, which moves project assessment increasingly onwards operating costs. The need to future-proof developments introduces the need for flexible and scalable design solutions. Risks can be mitigated by securing planning permission for the complete roll-out, and then incrementally building-out in response to changing demand requirements. 69

70 AECOM Middle East Handbook 2017 Design and cost drivers An increased focus on total cost of ownership has forced organisations and their designers to be cognisant of the cost impact of design decisions. Trade-offs must be made and decisions tailored for a given business, its needs and the IT infrastructure supporting it. This means that a data centre for a global cloud organisation will look very different from that of an investment bank. Local market knowledge also helps towards designing an effcient and balanced solution. Key design factors include: Location: historically, data centres often needed close proximity to metropolitan areas because of slower connection speeds and issues with latency (the delay in data transfer over the network). These issues are now less of a concern, save for specialist requirements such as high frequency trading. Data centres can therefore be located in more remote locations, providing a great number of lower cost benefits often relating to land, power and labour. Data centres can also be located in areas with low ambient temperatures allowing free cooling. Resilience: in the 1990s and early 2000s, high reliability was an essential requirement but often at great cost, both financially and with regards to effciency fully redundant systems in the financial services sector were a prime example. More recently, organisations only build in the necessary resilience to suit the systems and IT architecture they serve. Related to this is ensuring simplicity human error during operation is a major source of downtime risk, so the use of simple solutions is a preferred design strategy. Extent of technical area: in other words areas known as white space or data halls. Power and heat load density: recent data centres range from 1,500 to 2,000W/m 2, determined by planned server density average loads. Additional high density provisions are accommodated for cabinets with cooling loads of up to 30kW. Scalability: combining the ability for sustained growth, maximising usage of plant capacity and minimising service interruption is critical. Most systems do not initially run at full capacity, so scaling the infrastructure defers capital expenditure, improving the business case, while improving effciency. Flexibility: flexibility of layout and floor loadings stems from the building form, with facilities often housed in warehouses and industrial buildings. The need to refresh It servers, often on a three-year cycle, introduces a design requirement that enables higher frequency equipment change. As the infrastructure tends to operate for 10 or even 20 years, consequent technology upgrades may occur up to10 times during the data centre s operational life. Energy effciency: power usage effectiveness (PUE) measures the ratio of total input power input divided by power used by the It equipment. Eighty per cent of the infrastructure s total lifecycle cost is due to operating costs. Primary design issues therefore need to balance capital expenditure with the selection of solutions and plant and equipment that take account of actual anticipated usage. Data centre monitoring, control and systems integration: there has been focus on DCIM (data centre infrastructure management) systems or integration platforms that collate information and manage processes associated with the data centre infrastructure and It. Depending upon the level of integration, and the extent of the information that is being generated and managed, this can be a significant cost. Ancillary spaces: plant space, storage and IT assembly areas, administration accommodation and fallow, or swing space, aid the effective long-term operation of a facility. Although relatively low impact cost drivers on their own, since the building itself typically accounts for no more than 20% of overall costs, adequate and well-planned space ensures that operating costs are minimised and balanced with overall capital costs. 70

71 Middle East Handbook 2017 AECOM Resilience and availability The industry accepted definition of data centre availability is the Uptime Institute s four-tier system. This describes the overall resilience of the building infrastructure only and does not account for the IT systems, nor does it indicate an overall probability of downtime. This lack of granularity has led many organisations to tailor their own standards for resilience aligned to their business and the likely failure modes of their systems. For example, an organisation may install redundant electrical distribution but only a single chilled water pipework loop, knowing the probability of failure of the electrical systems is higher than the mechanical systems, using their chosen design approach. Systems that are affected by redundancy / resilience requirements include: Physical separation: the minimisation of risks associated with the location of equipment and distribution path. Fire separation may need to be included between redundant equipment, and power and cooling distribution may have to run in different fire zones. Power supplies: HV requirements can vary, with some facilities connecting to the primary grid for a more reliable supply; some may require two separate HV supplies, each rated to the maximum load. A fully diversified supply is a higher cost solution. Standby plant: a single generator N is usually adequate for Tier 1 data centres. Tier 2 facilities tend to need two generators, or N+1 depending on load/rating. The primary power source for Tier 3 and Tier 4 data centres is the generation plant, and the mains power acting as an economic alternative power source. Higher-tier ratings demand redundant plant to meet concurrent maintenance and fault tolerance criteria. Central plant (chillers, UPS and generators): varying levels of back-up plant is used to offset risks of component failure or maintenance cover. Data centres designed to Tier 3 and below use an N+1 redundancy strategy, whereby one unit of plant is configured to provide overall standby capacity for the system. The cost of N+1 resilience is influenced by the degree of modularity in the design. For Tier 4 data centres, systems must be fault tolerant, which generally results in fully redundant plant and distribution. Distribution paths (pipework/ductwork and cabling/ switchboards): power supplies and cooling may be required on a diverse basis, which avoids single points of failure while also providing capacity for maintenance and replacement. Cost impacts stem from the point at which diversity is provided. Tier 3 and 4 facilities require duplicate systems paths feeding down to practical unit (PDU, CRAC unit or AHU) level. Final distribution: power supplies to the rack are the final links in the chain. Individual equipment racks may or may not have two power supplies. Water supply: can be a key factor in system resilience, particularly where evaporation-based cooling solutions are used. User requirements and continuous, real-time IT processing capabilities are increasing all the time. Cloud and internet organisations manage resilience on both the IT and infrastructure level; they mirror data across multiple sites and handle resilience within the IT platform. Consequently, they have multiple facilities with lower resilience, reducing cost and often providing an overall greater level of resilience. 71

72 AECOM Middle East Handbook 2017 Sustainability Data centres account for approximately 2% of total global energy use. Performance, security and location were once the headline requirements for IT client organisations. Now though, a multidimensional decision process needs to allow for energy reduction and sustainability, amongst other things. Broader environmental concerns such as reducing carbon footprint or corporate requirements to achieve sustainable operations are increasingly seeing new data centres registering for BREEAM or LEED environmental assessments. Third-party providers of data centres also understand the advantages of similar concepts in their service offer. The opportunity for energy reduction exists to a far greater degree than other building types, because of the significantly higher demand and use of energy in data centres in the first place. Infrastructure Infrastructure effciency is an area of increasing focus for client organisations and design teams. A key metric for this has been PUE, which is the total data centre power requirement divided by server consumption. The Uptime Institute Annual Survey reports that the average operational PUE is 1.7. In the UK, new data centres will typically target a PUE of between 1.2 and 1.5, with the most effcient designs aiming for 1.15 or lower. Approaches to achieving energy savings in data centres include: Appropriate definitions of fault tolerance and availability: energy savings can be achieved via architectures that tolerate lower security levels. 72

73 Middle East Handbook 2017 AECOM Management of airflow in the computer room: limiting the mixing of hot and cold air in data centres is achieved using appropriate containment strategies. Significant effciencies can be gained when combined with orientation of equipment and racks that are cooled by air from a cold aisle and hot air which is then expelled into a hot aisle. Challenging internal conditions: historically data centres have been required to operate at fixed temperatures, typically about 22 C ±1 C and 50% relative humidity ±10%. Standards introduced by American Society of Heating, Refrigerating, and Air-conditioning Engineers (ASHRAE) allow for the data centre to operate within a much wider envelope of C under normal conditions. The standards also allow for operation at temperatures above those recommended for short periods, which can improve the effciency of the cooling solutions. As equipment manufacturers warrant their products for higher and higher temperatures, this trend will continue tempered only by the requirement for safe operating conditions for personnel in data centres which are already upwards of 35 C (and can be as high as 45 C) in the hot aisles. Direct and indirect fresh air cooling: increasingly, systems are being installed that allow the heat from the data hall to be removed directly using air only, without the use of a cooling water circuit. In more temperate climates, this can be achieved without the use of refrigerant-based cooling. So while this option is often more expensive, due to air distribution requirements, significant savings are made on the electrical side (due to the lack of high compressor loads) resulting in a net saving. Variable speed motors: these enable chillers, air handling plant and pumps to have their outputs modulated to suit the actual cooling requirements. Energy savings are achieved through part-load operation of the data hall and also offsetting plant over-provision associated with redundant units. High-effciency uninterruptible power supplies (UPS): Significant energy losses stem from the necessary provision of UPS to the data load and air-conditioning equipment. At low loads, which frequently occur due to the need to run multiple systems to maintain the relevant tier rating, the UPS effciencies can drop significantly. Considered selection of high-effciency or Eco-mode UPS equipment can mitigate UPS ineffciencies arising from low loads, particularly where multiple systems are operating to maintain a tier rating. IT Systems As marginal improvements in infrastructure effciency decrease, optimisation of server performance is becoming more important. This is concerned with getting maximum processing power per unit of investment in servers and running costs. Cloud services and virtualisation of server architecture (so that processers are shared), are improving utilisation and operational effciency. However, more must be done to turn off servers that aren t being used and to use server standby functionality. Improving this is a key focus for optimising data centre performance in the future. Adiabatic cooling: can improve the effciency of the heat rejection process but as water-use attains higher global scrutiny, technology that utilises water evaporation will be looked on less favourably. Free cooling chillers: using ambient air temperatures to cool equipment is a very low energy usage solution, and without the need to operate refrigerant cooling. 73

74 AECOM Middle East Handbook 2017 Cost model The cost model in the graphic below is based on a tier 3 twostorey, new-build data centre for loads up to 1,500 W/m 2. The scheme comprises two technical spaces, each with a gross internal area of 1,350m 2, 850m² of associated internal plant areas, 600m² of external plant deck and 950m² of support facilities. Electrical infrastructure to the site is via A and B supplies with on-site dedicated substations. Further resilience is provided by uninterruptible power supplies and diesel generators at N+1. The technical areas are completed including full fit-out and are capable of delivering up to 20kW per rack. Preliminaries 13.04% Testing and commissioning 0.91% Builders works 2.80% External works 1.75% Special installations 3.10% The m 2 rate in the cost breakdown is based on the technical area, not gross floor area. The costs of site preparation, external works and external services are included. Professional and statutory fees and VAT are not included. 5.00% Substructure 3.81% Frame 0.79% Upper floor 0.68% Roof 0.24% Stairs 2.23% External walls, windows and doors 1.09% Internal walls, partitions 0.29% Internal doors 0.30% Wall finishes 1.46% Floor finishes 0.43% Ceiling finishes 0.05% Furniture and fittings 0.03% Sanitary fittings Space cooling and air treatment 11.94% Average cost per sqm in GCC ranges between USD 19,350 and USD 22,150* Water installations 0.36% Disposal installations 0.04% Communications installation 2.36% Protective installations 2.56% Lift installations 0.95% 43.76% Electrical installations * Refer to the regional building cost comparisons table in Section 4 for a sample of hospital cost per square meter comparison across the GCC. Key 0.00% Percent of Total Cost 74

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78 AECOM Middle East Handbook 2017 Procurement routes All clients expect buildings to be on time and budget with an agreed level of quality, with the risk rightly managed by their professional and contracting team. However, most clients and construction professionals can name at least one project that was not delivered to budget, time or the quality levels expected. This is why the right procurement strategy, one that balances risk and control against the competing project objectives of cost, time and quality, is key to a successful project outcome. AECOM has developed strategies for the delivery of buildings that we know work, successfully delivering hundreds of projects over our long history. New and existing developers have the opportunity to learn from this knowledge and maximise the value from their time, cost and quality mix, whilst adhering to a process that increases the likelihood of their building being successfully procured by their team involved. Studies conducted with our key clients who regularly undertake development work, have shown that buildings can be delivered for percent less cost when procured correctly with no impact on quality or time. Buildings are more likely to be on time and meet clients expectations when procured correctly. So what is the right procurement approach for your building? Which funding strategy, funding partner, team behaviours, attitudes, communication channels, budget and program delivers the best approach and how can we best combine these to lead our clients to ultimate success? AECOM Project management AECOM offers important early advice to help determine the right procurement approach, adding value throughout the building process. This understanding of our clients time, cost and quality requirements maximises the value we can offer. Some of the procurement strategies followed in the industry are listed below, but the real challenge is mixing the right approach for an individual client s needs: Traditional lump sum: The design by the client s consultants is completed before contractors tender for and then carry out the construction. The contractor commits to a lump sum price and a completion date prior to appointment. The contractor assumes responsibility for the financial and program risks for the carrying out of the building works, whilst the client takes responsibility and accepts the risk for the quality of the design and the design team s performance. The client s consultant administers the contract and advises on aspects associated with design, progress and stage payments which must be paid by the client. Accelerated traditional: As above, but procured in the market place before being fully designed (normally percent designed), leaving more simple elements of the building to be procured once the contractor has been appointed. It is important to understand the way in which a client procures the remaining elements of work with a contractor under this approach and to design out those areas that carry inherent risk early in the process. It may also involve the procurement of an early works package for enabling and / or piling works. 78

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80 AECOM Middle East Handbook 2017 Two stage: A contractor is invited to become part of the project team in stage 1, usually by way of a pre-construction fee. They design and procure the project on behalf of the client, until such time that a second stage lump sum offer can be agreed, which should be before construction begins on site. An understanding of the original appointment and the subsequent framework under which the second stage is agreed, are the important aspects of this approach, as well as working with transparency and trust preventing an early commitment to a full scheme that a client cannot afford. Design and build: Detailed design and construction are both undertaken by a single contractor in return for a lump sum price. There are variants on this option depending on the degree to which initial design is included in the client s requirements. Where a concept design is prepared by a design team employed directly by the client before the contractor is appointed (as is normally the case), the strategy is called develop and construct. The contractor commits to a lump sum price, for completion of the design and the construction and to a completion date, prior to their appointment. The contractor can either use the client s design team to complete the design or use his own team. With design and build it is important to design out or specify in detail those parts of the building the client wants to see perform a particular function or provide a particular visual impact. Management contract: Design by the client s consultants generally overlaps with the construction. A management contractor is appointed early to tender and let elements of work progressively to subcontractors and specialists in work packages. The contracts are between the management contractor and the trade contractors, rather than between the client and sub-contractors. The management contractor will not carry out construction work, but is employed to manage the process. The management contractor in theory assumes responsibility for the financial (and program) risks for the works, but in reality this is normally diluted by the terms of the contract so his liability is similar to that of a construction manager. Turnkey contract: A form of a design and build contract, in which a single contractor or developer is responsible for all services, including finance. Under a turnkey project, the client enters into a contract with one party to deliver the entire project. The project is handed over once it is complete and fully operational. The client is normally not involved in any of the decisions throughout the building process. There are several variations of turnkey contracts, including Engineer-Procure-Construct (EPC), Build-Own-Lease-Transfer (BOLR), Design-Build-Operate-Transfer (DBOT), or PFI. Private finance: A detailed and complicated form of procurement used predominantly for public services when the private sector feels it is advantageous to design, build, finance and operate a particular service or building type. It is becoming more popular in the Middle East as a way to limit public sector spending whilst meeting the demands of a growing population. AECOM has been involved with private finance for over 20 years. We have successfully completed many projects worldwide and use this global knowledge to benefit clients locally. Engineer, procure and construct (EPC): EPC is a form of turnkey contract. This form of procurement places risk in the right hands and offers solutions to clients engineering requirements from those specialized to meet the performance requirements set by a client team. Many of the large utility companies procure work in this way, bringing high levels of certainty from the supply chain which helps to achieve business critical benefits over the long-term. Design, manage and construct: Similar to the management contract, with the contractor also being responsible for the production of the detailed design or for managing the detailed design process. 80

81 Middle East Handbook 2017 AECOM Middle East forms of contract This article considers the different forms of contract used in construction across the region. Bahrain United Arab Emirates Oman Kingdom of Saudi Arabia Qatar 81

82 AECOM Middle East Handbook 2017 Bahrain Government work in the Bahrain is undertaken using a bespoke suite of contract forms which were issued in Private developers predominantly use the current FIDIC Conditions of Contract for Construction, the 1999 edition of the red book, which is well understood in the local market but often heavily amended for specific use. Most of the work completed in Bahrain is under a traditional lump sum form of contract, where the design is completed upfront and price agreed with a contractor before work begins on site. Design and build and two stage procurement are in use across the Kingdom but are not considered to be the industry norm. As more international private developers have started working in Bahrain with time constraints as their main driver, the market has adjusted to accommodate this demand. Design and build contracts, however, are not routine. This is largely due to the Committee for organising Engineering Professional Practice (COEPP) restrictions on contractors undertaking in-house design which necessitates the novation of the client s architect or a sub consultant appointment. Kingdom of Saudi Arabia Construction contracts in the private sector are generally based on FIDIC forms of contract and are amended to suit the particular conditions for each project. Employers prefer lump sum versus remeasured contracts and normally exercise great control in the administration of the construction process by imposing various restrictions on the engineer s (consultant) authorities under the contract. All contracts are subject to Saudi laws where Islamic Sharia is the prime source of legislation. Litigation and arbitration are both available for resolution of disputes in the private sector. Within the public sector, however, construction contracts are based on the Standard Conditions for Public Works, which are amended to suit particular projects. These conditions are generally based on those given in the 4th edition of the FIDIC Conditions of Contract for Works of Civil Engineering Construction, the FIDIC 4 red book, but with greater control given to the employer for the administration of the contract. All public work contracts are let on remeasured basis and subject to the Saudi Government Tendering and Procurement Regulations, as issued by Royal Decree. 82

83 Middle East Handbook 2017 AECOM Oman Public works in Oman are undertaken using a bespoke government contract known as the Standard Documents for Building and Civil Engineering Works, 4th edition, The document is based on early FIDIC contracts with the 4th edition containing only minor changes from the previous 3rd edition, The most important change is that the contract is now printed in Arabic. The Ministry of Legal Affairs is in the process of preparing a new edition but its launch date is yet to be published. The Standard Document facilitates both a re-measurement and a form of lump sum contract dependant on choice of clauses (although it is recognised that under the lump sum clause the Employer retains the risk with respect to BQ errors), and is based upon a fully completed design, specification and bill of quantities. The RICS Principles of Measurement (International) are the most widely used method of measurement although quasi-government and private clients are exploring alternatives and RICS New Rules of Measurement are increasingly being used. Infrastructure projects have their own method of measurement, as detailed within the Ministry of Transport and Communications document, Highway Design Standards. Oman Tender Board laws require all government projects to utilise the Standard Documents on every project, without amendment. In addition, the Tender Board facilitates all government tenders, centrally, through the tender board process. Only Royal Offce and Royal Court of Affairs projects are exempt from this process although they do go through a similar internal tender process. Standard documents are commonly used by private sector clients in the local market, particularly for small-to-medium sized contracts. Private clients tend to prefer the 3rd edition as this is written in English, but varies only in a minor way from the Arabic 4th edition preferred by the government ministries. International and private sector clients with large project contracts, USD150 millionplus, commonly use an amended version of the FIDIC red book. Whilst some of the larger integrated tourism developments have used a design build form of contract, design and build as a procurement route is not routinely used. 83

84 AECOM Middle East Handbook 2017 Qatar In Qatar the most common forms for building works are those issued by the Public Works departments through the Ministry of Municipal Affairs and Agriculture (MMAA) and the Qatar Petroleum Company (QP). These are lump sum contracts, generally using bills of quantities or specifications and drawings. These contracts are onerous and slanted towards the client, but are usually administered in a reasonable manner. In the private sector, similar contractual arrangements are adopted. However, there are now some construction projects being let using cost plus or design and build arrangements. This now includes a number of the Qatar World Cup Stadia which have been procured on a developed design stage and contracted on a D&B basis. The market has seen an increase in the number of FIDIC based contracts being implemented for both private and key public sector clients. In addition, in some very long duration contracts, the government is beginning to introduce a price adjustment mechanism to allow compensation for fluctuations in market prices. Before any contract is awarded, there are commonly a number of rounds of negotiation, during which the price and other contractual terms can be modified to respond to a reduction in contract price. 84

85 Middle East Handbook 2017 AECOM UAE Construction contracts in the UAE are predominantly based upon the FIDIC forms of contract. The growing number of large scale developers and major repeat clients in the region has led to the development of bespoke forms of contract, tailored to each individual client. Such contracts generally use the FIDIC 4 red book form as a basis, amended to a greater or lesser degree depending upon the risk profile of each client. This also applies to works procured by Dubai Municipality. Abu Dhabi Municipality, however, bases its contract on a modified FIDIC 3 form, taken from the 3rd edition of the FIDIC conditions of Contract for Works of Civil Engineering Construction. Contracts based on the 1999 red book are now starting to be used in the UAE, but in general the market remains firmly rooted in the FIDIC 4 form. Civil works contracts within the UAE are mostly procured on a re-measurable basis, whereas building works will generally be based on a fixed price lump sum. However, there are exceptions. More and more clients are procuring projects using a fast track approach and will therefore incorporate a re-measurable element, reflecting those parts of the design which are incomplete at tender stage. 85

86 AECOM Middle East Handbook 2017 Building regulations and compliance This section outlines the procedures for obtaining building permission across the region. The AECOM Project Management team are experienced in the procedures for obtaining Building Permits across the region and are able to oversee this process. Bahrain Procuring a Municipal Building Permit in Bahrain is done through a three stage process: Stage 1: Seeking the preliminary building permit This is preliminary permission sought from the Municipality of Bahrain. To complete the application it is generally suffcient to include simple outline plans, cross-sections to indicate overall heights and an area statement. The main authorities involved at this stage are the Municipality, the Physical Planning Directorate and the Roads Directorate. Stage 2: Informing the various directorates This should be done in writing to the Town & Village Planning Directorate, Roads Directorate, the Civil Defence and Fire Services Directorate, the Electricity Distribution Directorate (EDD), EDD Damage Protection and Control Unit, the Sanitary Engineering Operations and Maintenance Directorate, the Water Distribution Directorate and Batelco. The initial contact should be made through the Central Planning Offce (CPO) of the Ministry of Works. Additionally, a pre-approval would be required for certain building types from the concerned authorities: 86 Tourism Authority for hotels Ministry of Health for hospital, health centres and restaurants Ministry of Education for universities and schools Ministry of Municipalities and Urban Planning for special projects, however approval might not be needed at this stage if it was already obtained in Stage 1. Copies of the Title Deeds must be submitted at this stage. All relevant information and documentation is given to each of the above Directorates, until the final Building Permit is in hand. Stage 3: Obtaining the final municipal building permit This is the third and last stage. The initial contact should be made through the Municipality One Stop Shop (OSS). OSS checks the application and forwards it to the Ministry of Urban Planning. From the Ministry of Urban Planning the documents are then distributed to all the disciplines simultaneously except the concerned Municipality (depending on building type). The application is forwarded to the concerned Municipality at the end for final review and approval. All documents, drawings and Municipality forms must be filled in and submitted together with the appropriate fees to OSS. Half of the fees are paid when the application is submitted. Municipal charges must be paid for the following elements: 1. Site sign board 2. Insurance on the site sign board 3. Insurance for Construction Contract (refundable) 4. Capital contribution from the Electricity and Water Authority 5. Construction waste container 6. Fee for occupying road.

87 Middle East Handbook 2017 AECOM If the Environmental Affairs Department are involved in the process, they will charge a reviewing fee. Kingdom of Saudi Arabia Obtaining a Building Permit in the Kingdom of Saudi Arabia varies from region to region, however they tend to follow the same basic principles. The various procedures and approvals from the Main Municipality, the Branch Municipality and the Fire Department need to be obtained. Obtaining these approvals typically takes between three to four months depending on the nature and size of the building/project. The following is a general outline of the steps needed to obtain a Building Permit: Stage 1: Obtaining letter from the main municipality A letter from the owner is submitted to the main Riyadh Municipality, along with a copy of the land deed. The Municipality checks the masterplan of the area to ensure the suitability of the plot for the construction of a building. The Municipality then writes a letter to the Branch Municipality of the area where the plot is located. This process takes five days and does not incur a charge. Stage 2: Obtaining preliminary location permit from branch municipality The owner submits a copy of the letter obtained previously from the Main Municipality to the Branch Municipality, requesting an inspection of the plot to ensure that the plot length, width and total area are as indicated on the deed. The Branch Municipality then issues an approval to use the land. This process takes five days and does not incur a charge. Stage 3: Obtaining approval from the Fire Department The Branch Municipality writes to the Fire Department, or Civil Defence, to obtain its approval of the plan submitted by the owner for the fire-alarm and fire-fighting systems. The Fire Department approves these plans and sends them back to the Municipality. This process takes ten days and does not incur a charge. Stage 4: Obtaining a final building permit The Branch Municipality issues a Building Permit and sends it to the Main Municipality for approval, which is given dependent on the nature of the building. The owner can collect the Permit from the Main Municipality after one to three months. The cost of this Permit is SAR 1,200. Oman The following is a general outline of the procedure for obtaining a building permit in the Sultanate of Oman but there are many further obligations and procedures to be completed within each of the stages. It is generally the responsibility of the lead consultant to obtain the building permit, although all applications must be signed off and submitted by locally registered consultants. Stage 1: Submitting concept design / master plan stage application The applicant submits a Concept Design/Master Plan application to the Ministry of Housing - Directorate General of Planning for approval of the proposed usage. At the same time utility requirements are identified and indicated to the relevant utility providers. If the project is tourism related, further approvals are required from the Ministry of Tourism and the Supreme Committee for Town Planning. Stage 2: Obtaining No Objection Certificates (NOCs) No Objection Certificates are obtained from various governmental and municipal departments, including, Royal Oman Police, Security Department, Traffc Department and Civil Defence, Ministry of Environment, Municipality Road Department, Ministry of Transport & Communications, Civil Aviation, and many more project-specific ministry departments, e.g. Ministry of Education if the project is a school or university. Stage 3: Submitting a building permit application The full building permit application, including all NOCs, is submitted to the relevant municipality or statutory authority. Note that after the Building Permit is obtained, Contractor Designed elements of work that require municipality/statutory authority approval are submitted to the relevant municipality/ statutory authority through the Building Permit holder (usually the lead consultant). 87

88 AECOM Middle East Handbook 2017 Stage 4: Obtaining building occupancy certificate Upon completion of the building works, it is the responsibility of the construction contractor or lead consultant to obtain the occupancy permit. This is achieved by having the building permit signed off, effectively closing it out. To obtain this closure, the contractor must obtain certificates and signatures from various government departments, including Civil Defence, Food and Hygiene, etc, prior to presenting these to the municipality or statutory authority for final approval. Qatar Compared with many countries, the planning and building approval process in Qatar is relatively clear and structured. Land ownership, other than by Qatari nationals and the state, is still extremely limited. The key process in securing development rights is obtaining a land title or pin number; since without it all other permits and applications cannot be commenced. Once the land is secured, the project masterplan is submitted for approval to the Planning Department and local Municipality offces. Stage 1: DC1 Approval General overviews and strategies for the utilities and primary infrastructure are submitted to the relevant utility companies for comment. During this process each department generally issues a series of reference numbers which are then used as the file number for all future submissions. The culmination of this round of submissions is the DC1 approval. Stage 2: DC2 Approval As the design develops, a second round of submissions is made to the same utility departments for final approval. In addition, a submission is made to the Civil Defence department who review the fire and life safety aspects of the project. Stage 3: Building permit Once the DC2 approval is secured a further set of standard forms are circulated with a consolidated set of documents for final signing and approval. These documents constitute the Building Permit. As a general guide the whole process usually takes at least 80 days, depending upon the quality of the submission, although in practice if often takes much longer due to comments from different departments and progressive design revisions. During the whole of this process, it is generally not advisable to revise or modify any submission as it may delay the approval process. All submissions have to be either in Arabic or bilingual and endorsed by locally registered and approved design companies. International companies cannot make these submissions by themselves. There are some parts of Qatar which are exempt from the Building Permit approval process, but these are generally related to the oil and gas production facilities. Recently a number of revisions have been made to the design standards of buildings, in particular high rise structures. These address issues such as fire safety, refuge areas, the use of lifts in the event of fire, and the nature and extent of façade glazing. All fit-out projects are being brought under the control of the regulatory departments, in particular Civil Defence, and all such works are now required to be submitted for approval prior to commencement. This submission must be made by a registered local consultant and failure to do this can significantly delay the approval and permitting process. Depending upon the scale and nature of the project, separate traffc studies may be required and these would be submitted to the Road Affairs Department for approval. 88

89 Middle East Handbook 2017 AECOM UAE The following is a general outline of the procedure for obtaining a Building Permit in the UAE, but there are many further obligations and procedures to be completed within each of the stages. Building Permit application Stage 3, for example, requires no less than 15 different forms, documents and separate approvals to be submitted as part of the application. It is the responsibility of the construction contractor or lead consultant to obtain the Building Permit, although all applications must be signed by locally registered consultants. Stage 1: Submitting preliminary application The applicant submits a preliminary application to the relevant municipality or statutory authority and pays a deposit. Stage 2: Obtaining No Objection Certificates No Objection Certificates (NOCs) are obtained from various governmental and municipal departments including Civil Defence, Fire Department, Drainage, Communication, Water and Electricity, Civil Aviation, Oil and Gas, Coastal and Military. Stage 3: Submitting building permit application The full Building Permit application, including all NOCs, is submitted to the relevant Municipality or statutory authority. Stage 4: Obtaining building permit On approval, the applicant collects the Building Permit and applies for a Demarcation Certificate. Stage 5: Obtaining building occupancy certificate Upon completion of the building works, it is the responsibility of the construction contractor or lead consultant to obtain the Occupancy Permit. This is achieved by having the Building Permit signed off, effectively closing it out. To obtain this closure the contractor must obtain certificates and signatures from various government and quasi-government departments, including Civil Defence, Food and Hygiene, CID etc, prior to presenting these to the Municipality or statutory authority for final approval. Al Madina Al Shamaliya, Bahrain 89

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92 AECOM Middle East Handbook 2017 International building cost comparison The international cost data shown is a comparison of local construction costs converted to U.S. Dollars to enable comparison. The building costs for the respective asset types are averages based on local specifications and the actual cost of a building will depend on among other things unique site conditions, design attributes and applicable tariffs. In addition, the standard for each building varies from region to region, which may have a significant impact on costs. Costs are subject to considerable variations due to factors such as: Local marked conditions Complexity of project Commodity price movements Building specifications Exchange rates Exchange rate trends In recent years, exchange rate movements have been significant, as diverging economic performance has led to many major currencies experiencing major shifts against the U.S. Dollar. Current exchange rate trends are being impacted by: Weakening U.S. dollar US Federal Reserve monetary policy shifts Political developments Corporate debt issues in China Global commodity price recovery dynamic Currency depreciation against the U.S. Dollar translates into a relative drop in building costs when expressed in U.S. Dollar, making these locations / regions relatively cheaper in U.S. Dollar terms. 92

93 Middle East Handbook 2017 AECOM Figure 36. Exchange rate trends Currency movements of the US Dollar against major currencies Q compared to Q Turkey (TRL) UK (GBP) Malaysia (MYR) China (NCY) Canada (CND) Japan (JPY) Euro (EUR) Singapore (SGD) Hong Kong (HKD) Australia (A$) New Zealand (NZD) India (INR) Brazil (BRL) South Africa (ZAR) Russia (RUB) -20% -10% 0 10% 20% 30% 40% 50% Source: Bank of England. 93

94 AECOM Middle East Handbook 2017 International construction cost inflation Figure 37. International construction cost inflation Quarter y-o-y change 30% 20% 10% 0% -10% -20% -30% Q Q Q Q Q Q Q Q Q UAE UK Euro Area Turkey Singapore USA Hong Kong India Source: Based on AECOM Indices for UK, UAE; ENR USA Construction Cost Index; Singapore Building Construction Authority, Hong Kong Building Works Tender Price IndeX, EuroaArea Eurostat Construction Output Index, India CIDC Construction Cost Index, Turkey 94

95 Middle East Handbook 2017 AECOM Residential building cost comparison Figure 38. Average building cost for standard residential high rise Quarter y-o-y change Kuala Lumpur, Malaysia Shanghai, China Beijing, China Johannesburg, South Africa Ho Chi Minh, Vietnam Bangkok, Thailand Dubai, UAE Singapore Hong Kong, China Sydney, Australia Los Angeles, USA London, UK San Francisco, USA New York, USA Source: AECOM 0 1,000 2,000 3,000 4,000 5,000 USD / sqm Average Building Costs (USD/sqm) Residential Australia Sydney China Hong Kong China Beijing China Shanghai Malaysia Kuala Lumpur Singapore South Africa Johannesburg Thailand Bangkok UAE Dubai USA Los Angeles USA San Francisco USA New York UK London Vietnam Ho Chi Minh Luxury unit high rise Individual prestige houses (As at 1 April 17) USD1 = 3,996 4,500 1,600 1, ,440 1,213 1,572 2,373 4,600 5,000 5,900 5,287 1,028 4,651 6, ,074 1,187 1,649 NA 4,300 5,100 5,500 5, AUD HKD CNY CNY MYR SGD ZAR THB AED USD USD USD GBP VND , Note: Prices exclude land, site works, professional fees, tenant fit out and equipment. Rates exclude GST/VAT. Costs based on 1 July Exchange rates to USD as at 1 April

96 AECOM Middle East Handbook 2017 Commercial building cost comparison Figure 39. Average building cost for standard offces high rise Kuala Lumpur, Malaysia Johannesburg, South Africa Bangkok, Thailand Shanghai, China Beijing, China Ho Chi Minh, Vietnam Dubai, UAE Singapore Hong Kong, China Los Angeles, USA London, UK Sydney, Australia San Francisco, USA New York, USA Source: AECOM 0 1,000 2,000 3,000 4,000 5,000 USD / sqm Average building costs (USD/sqm) Building Type Australia Sydney China Hong Kong China Beijing China Shanghai Malaysia Kuala Lumpur Singapore South Africa Johannesburg Thailand Bangkok UAE Dubai USA Los Angeles USA San Francisco USA New York UK London Vietnam Ho Chi Minh Prestige offces high rise Major shopping centre (CBD) (As at 1 April 17) USD1 = 4,979 4,000 1,450 1,500 1,210 3,952 1,187 1,134 1,993 4,300 4,700 5,200 5,213 1,234 3,577 4,600 1,500 1,450 1,273 3, ,679 3,300 3,795 3,960 4, AUD HKD CNY CNY MYR SGD ZAR THB AED USD USD USD GBP VND , Note: Prices exclude land, site works, professional fees, tenant fit out and equipment. Rates exclude GST/VAT. Costs based on 1 July Exchange rates to USD as at 1 April

97 Middle East Handbook 2017 AECOM Industrial and other building cost comparison Figure 40. Average building cost for light duty factory Ho Chi Minh, Vietnam Johannesburg, South Africa Kuala Lumpur, Malaysia Shanghai, China Beijing, China Bangkok, Thailand Sydney, Australia Dubai, UAE Singapore Los Angeles, USA San Francisco, USA London, UK Hong Kong, China New York, USA Source: AECOM 0 1,000 2,000 3,000 4,000 5,000 USD / sqm Average building costs (USD/sqm) Residential Australia Sydney China Hong Kong China Beijing China Shanghai Malaysia Kuala Lumpur Singapore South Africa Johannesburg Thailand Bangkok UAE Dubai USA Los Angeles USA San Francisco USA New York UK London Vietnam Ho Chi Minh Heavy duty factory Multi storey car park 956 NA NA NA 517 1, ,800 1,950 3,600 2, ,650 NA NA ,230 1,550 1, District hospital 6,125 6,000 NA 1, ,245 1,866 NA 2, ,700 8,300 4,260 NA Primary & Secondary schools 2,516 2,800 NA NA 330 1, NA 1,510 3,900 4,010 4,520 2,730 NA (As at 1 April 17) USD1 = AUD HKD CNY CNY MYR SGD ZAR THB AED USD USD USD GBP VND , Note: Prices exclude land, site works, professional fees, tenant fit out and equipment. Rates exclude GST/VAT. Costs based on 1 July Exchange rates to USD as at 1 April

98 AECOM Middle East Handbook 2017 Hotels building cost comparison Figure 41. Average building cost for 5 Star luxury hotel Dubai, UAE Ho Chi Minh, Vietnam Bangkok, Thailand Beijing, China Kuala Lumpur, Malaysia Shanghai, China Johannesburg, South Africa Los Angeles, USA Singapore San Francisco, USA Hong Kong, China New York, USA London, UK Sydney, Australia Source: AECOM USD thousands / key Average building costs (USD/sqm) Residential Australia Sydney China Hong Kong China Beijing China Shanghai Malaysia Kuala Lumpur Singapore South Africa Johannesburg Thailand Bangkok UAE Dubai USA Los Angeles USA San Francisco USA New York UK London Vietnam Ho Chi Minh 3 Star budget 347, , ,000 NA 151,500 97, ,800 61,856 52,300 75,000 79,000 84,000 89,000 NA resort style NA NA 386,000 NA 248, ,136 NA 270, , , , , , ,333 (As at 1 April 17) USD1 = AUD HKD CNY CNY MYR SGD ZAR THB AED USD USD USD GBP VND , Note: Prices exclude land, site works, professional fees, tenant fit out and equipment. Rates include FF&E. Rates exclude GST/VAT. Costs based on 1 July Exchange rates to USD as at 1 April

99 Middle East Handbook 2017 AECOM Regional building cost comparison Building cost (USD/sqm) UAE (Dubai) KSA (Riyadh) Qatar (Doha) Bahrain (Manama) Oman (Muscat) Sectors Typology Low High Low High Low High Low High Low High Residential Commercial Retail Industrial Hotel Car parks Other Low rise 970 1, ,360 1,260 1, , Medium rise 1,050 1,530 1,225 1,500 1,540 1,820 1,100 1,500 1,045 1,280 High rise 1,530 2,360 1,630 2,040 1,820 1,960 1,370 1,780 N/A N/A Low rise offce (shell and core) 1,110 1, ,220 1,260 1,540 1,090 1, Mid rise offce (shell and core) 1,260 1,530 1,225 1,630 1,540 1,820 1,370 1, High rise offce (shell and core) 1,390 2,080 1,630 2,170 1,820 2,240 1,500 2,050 N/A N/A Fit-out - basic 1,110 1, Fit-out - medium 1,530 1, , , Fit-out - high 1,950 2,500 1,230 1,630 1,260 1, ,370 N/A N/A Community 1,270 1, ,120 1,400 1,090 1,370 1,040 1,210 Regional mall 1,320 1,620 1,090 1,500 1,260 1,680 1,220 1,500 N/A N/A Super regional mall 1,470 1,800 1,220 1,770 1,260 1,820 1,370 1,775 1,070 1,240 Light duty factory , , Heavy duty factory 880 1, , , , ,170 Light industrial unit (LIU) N/A N/A Data centre - tier 3 (*based on aed/kw(it)) 19,440 22,220 18,500 21,230 20,160 22,960 N/A N/A N/A N/A Budget 1,810 2,220 1,360 1,630 2,380 2,520 1,500 1,780 N/A N/A Mid-market 2,220 2,770 1,630 2,170 2,520 3,500 1,640 2,180 2,260 3,150 Up market 3,335 3,750 2,580 2,990 3,500 4,200 2,050 2,590 2,650 3,080 Resort 3,190 3,890 2,990 3,540 3,920 4,700 2,460 3,270 N/A N/A Multi storey Basement N/A N/A Schools - primary, secondary academy 1,340 1, ,360 1,536 2,095 1,367 1, ,540 Healthcare - district hospital 2,170 3,190 1,910 2,720 2,240 2,800 2,460 3,000 2,170 2,790 Exchange rate to 1 USD AED 3.67 SAR 3.75 QAR 3.64 BHD 0.37 OMR 0.38 Note: All costs are based on Q For Typology Definitions, inclusions and exclusions see Appendix 1 Relative cost of construction are based on typical build costs in USD. Influence of foreign exchange fluctuations, unique site conditions, design attributes and applicable tariffs must be considered when comparing actual projects. Relative costs are based on an average across all sectors. 99

100 AECOM Middle East Handbook 2017 Mechanical and electrical cost comparison Building cost (USD/sqm) UAE (Dubai) KSA (Riyadh) Qatar (Doha) Bahrain (Manama) Oman (Muscat) Sectors Typology Low High Low High Low High Low High Low High Residential Commercial Retail Industrial Hotel Car parks Other Low rise Medium rise High rise N/A N/A Low rise offce (shell and core) Mid rise offce (shell and core) High rise offce (shell and core) N/A N/A Fit-out - basic Fit-out - medium Fit-out - high N/A N/A Community Regional mall N/A N/A Super regional mall Light duty factory Heavy duty factory Light industrial unit (liu) N/A N/A Data centre - tier 3 (*based on aed/kw(it)) 14,290 16,330 13,610 15,780 15,400 17,640 N/A N/A N/A N/A Budget , N/A N/A Mid-market ,010 1, ,060 Up market ,030 1,190 1,400 1, ,010 1,180 Resort ,195 1,420 1,400 1, ,110 N/A N/A Multi storey Basement N/A N/A Schools - primary, secondary academy Healthcare - district hospital 900 1, , ,260 1,180 1,440 N/A N/A Exchange rate to 1 USD AED 3.67 SAR 3.75 QAR 3.64 BHD 0.37 OMR 0.38 Note: All costs are based on Q

101 Middle East Handbook 2017 AECOM Major measured unit rates Item (unit rates in USD) Unit Description UAE (Dubai) KSA (Riyadh) Qatar (Doha) Bahrain (Manama) Oman (Muscat) Excavation m 3 Excavation for trench foundation; "Standard / Minimum Specification depth not excessive, i.e. no greater than 1-2 m" Disposal of excavated material m 3 "Standard / Minimum Specification Disposal away from site" Filling m 3 Imported fill Poured concrete, reinforced m 3 "Standard / Minimum Specification Grade 20 or 30; superstructure, walls or slabs; reinforced" Reinforcement tn "Standard / Minimum Specification 20mm bars" Formwork / shuttering m 2 "Standard / Minimum Specification Superstructure standard; fair face finish to walls" Blockwork m 2 "Standard / Minimum Specification 200mm solid blockwork, usually internal walls" Doors No. "Standard / Minimum Specification Single leaf door, fire rated, timber, basic finish, usually 900mm wide, generally excluding ironmongery" Tiling to floors m 2 "Standard / Minimum Specification 300 x 300mm ceramic tiles" 1,059 1,374 1,131 1,209 1, ,065 1, Plaster to internal walls and ceilings m mm thickness Painting to internal walls and ceilings m 2 "Standard / Minimum Specification Emulsion" Exchange rate to 1 USD AED SAR QAR BHD OMR Note: All costs are based on Q

102 AECOM Middle East Handbook 2017 Major material prices Item Description Unit UAE (Dubai) KSA (Riyadh) Qatar (Doha) Bahrain (Manama) Oman (Muscat) USD USD USD USD USD Cement Ordinary portland cement Tonne Sand Sand for concreting m³ Aggregate 19mm aggregate m³ RMC Grade 50 (OPC) m³ Grade 40 (OPC) m³ Grade 20 (OPC) m³ Reinforcing steel High tensile Tonne Mild steel Tonne Hollow concrete blockwork 100mm thick m² mm thick m² Structural steelwork Mild steel grade 50 to BS 4360 Tonne 1,035 1,601 2, ,247 Timber Hardwood m³ , ,997 Softwood m³ Fuel Diesel Litre Petrol premium 95 Litre Exchange rate to 1 USD AED SAR QAR BHD OMR Note: All costs are based on Q Cost rates are indicative and represent supply only costs of the materials listed. Location factors should be applied to address geographic variations in each country. The rates are exclusive of VAT (Value Added Tax) or similar, where applicable. 102

103 Middle East Handbook 2017 AECOM Labour costs Description Skilled operatives Unit UAE (Dubai) KSA (Riyadh) Qatar (Doha) Bahrain (Manama) Oman (Muscat) USD USD USD USD USD Concreter hour Steel fixer hour Bricklayer hour Carpenter hour Mechanical installer hour Electrician hour Laborer (skilled) hour Foreman hour MEP foreman hour Site engineer month 6,944 4,898 6,066 5,406 3,253 Construction manager month 11,110 14,150 15,110 11,461 5,987 Note: All costs are based on Q These rates (USD) are indicative and represent an all-in unit cost for each of the disciplines listed; and are inclusive of: wages, salaries and other remunerations prescribed by local labour legislation; average allowances for costs of employment; recruitment; visas/ permits; paid leave; travel; accommodation; health and welfare exclusive of: overtime working; contractor mark-up for overheads and profit; VAT (Value Added Tax) or similar where applicable. These rates should not be misinterpreted as contractors daywork rates. 103

104 AECOM Middle East Handbook 2017 Middle East indices The UAE Tender Price Index is AECOM s assessment of construction tender prices in the UAE. It is compiled by AECOM s Middle East Business Intelligence team based on actual returns of projects. It is based on new build and refurbishment projects across a variety of construction sectors and covers all emirates of the UAE. The Index is therefore a measure of average price increases across differing project types and locations. It should be regarded as a guide only when looking at any specific project, as the pricing of individual projects will vary depending on such factors as their complexity, location, timescale, etc. Figure 42. AECOM UAE tender price inflation index and forecast The relative cost of construction in the Middle East is based on typical build costs in USD. High and low cost factors for each building type have been calculated relative to the UAE (Dubai), where average costs equal 100. The relative cost bars plotted in the chart represent the average high and low cost factor for each location, based on the costs of the buildings included in the sample (excluding commercial fit-outs). Forecast Index: Q = Q Q Q Q Q Q Q Q Q Q Q Q Q Source: AECOM Construction Unit Rates Index Forecast TPI: Upper Limit of Range Commodities and Materials Index (unweighed) Forecast TPI: Lower Limit of Range

105 Middle East Handbook 2017 AECOM Table 9: Project risk index Annual percentage change f 2016f 2017H1 2017f 2018f % 1.5% 1-3% 1-4% Source: AECOM Figure 43. Middle East relative cost of construction Qatar (Doha) UAE (Abu Dhabi) UAE (Dubai) Bahrain (Manama) KSA (Riyadh) Oman (Muscat) Note: Relative costs of construction are based on typical build costs in USD. High and low cost factors for each building type have been calculated relative to the UAE (Dubai), where average costs equal 100. The relative cost bars plotted in the chart represent the average high and low cost factor for each country, based on the costs of the buildings included in the sample (excluding commercial fit-outs). 105

106 AECOM Middle East Handbook 2017 Typical building services standards for offces Subject Bco (UK) specification 2009 Bahrain specification UAE specification* Qatar specification Oman specification Net: gross ratio (Typical) 80-85% 70-80% 75-80% 70-80% 70-80% Occupancy standards Typical 1:8-1:13/m² 1:10-1:14/m² 1:10-1:15/m² 1:10-1:14/m² 1:10-1:15/m² Occupancy standards Dealer none stated 1:7-1:12/m² 1:7/m 2 1:7-1:12/m² 1:7/m 2 Occupancy standards Toilets Form of air conditioning Heating and air conditioning internal criteria Fresh air supplies Single sex one person to 12m² using 60/60 male/female ratio based on 120% population. Fan Coil Units, VRV/ VRF, VAV, Displacement, Chilled Ceiling/Beam, Natural or mixed mode ventilation. 24 o C, +/- 2 o C (Summer) 22 o C, +/- 2 o C (Winter) liters per second per person Single sex one person to 12m² using 70/30 male/female ratio based on 120% population. Fan Coil Units, VAV, DX, Constant Volume Single sex one person to 12m² using 70/30 male/female ratio based on 120% population. Fan Coil Units, VAV, Downflow Units Single sex one person to 12m² using 70/30 male/female ratio based on 120% population. Fan Coil Units, VAV, VAV with Re-Heat, DX, Constant Volume, plate heat exchangers Single sex one person to 12m² using 70/30 male/female ratio based on 120% population. Fan Coil Units, VAV, Downflow Units 22 o C, +/- 1 o C 22 o C, +/- 2 o C 22 o C, +/- 2 o C 22 o C, +/- 2 o C 10 liters per second per person liters per second per person Ventilation WC s (extract) none stated 12 air changes per hour 3-10 air changes per hour liters per second per person liters per second per person 10 air changes per hour 10 air changes per hour Internal heat gains Lighting load 12 W/m² 15 W/m² 12 W/m² W/m² 12 W/m² Internal heat gains Equipment load (typical) Internal heat gains Equipment load (dealer) Supplementary cooling allowance (e.o./% area) none stated 25 W/m² 15 W/m² 15 W/m² 15 W/m² none stated W/m² 45 W/m² None none stated 25W/m² to 25% area None 25 W/m² to 25% area None none stated Acoustics Offces NR NR 35 NR NR NR Acoustics Common areas NR NR 40 NR NR 40 NR

107 Middle East Handbook 2017 AECOM Subject Bco (UK) specification 2009 Bahrain specification UAE specification* Qatar specification Oman specification Primary power Lighting 12 W/m² 15 W/m² 12 W/m² W/m² W/m² Primary power Typical W/m² 35 W/m² 25 W/m² W/m² W/m² Primary power Dealer none 400, 800 or 1,500W per desk Primary power upgrade (e/o power/% area) Lighting Offce 20-25w/m², 20-25% area lux, Uniformity Ratio or 1,600W / person None none stated None 25 W/m² to 25%area None none stated lux lux, Uniformity Ratio lux lux, Uniformity Ratio 0.8 Lighting Stairs / circulation lux 250lux lux Lighting WCs 215lux 200lux 215lux Lighting Plantrooms 215lux 150lux 215lux Passenger lifts Capacity and waiting times 80% loading with 25 second waiting interval, handling 15% in five minutes. Population density 1:12 80% loading with 35 second waiting interval, handling capacity of 11% to 17% in five minutes. Population density 1:12 80% loading with 35 second waiting interval, handling 15% in five minutes. Population density 1:14 80% loading with 30 second waiting interval, handling 15% in five minutes. Population density 1:14 80% loading with 30 second waiting interval, handling 15% in five minutes. Population density 1:14 * Specific to the Emirate of Abu Dhabi (differing standards in the seven Emirates). Excludes implications of new building code regulations for the Emirate which came into effect at the beginning of

108 AECOM Middle East Handbook 2017 Exchange rates EUR GBP INR RMB JPY AED SAR QAR OMR BHD KWD EGP LBP JOD 1 USD= Eurozone UK India China Japan UAE KSA Qatar Oman Bahrain Kuwait Egypt Lebanon Jordan H , H , H , H , H , H , H , H , H , H , H , Source: Bank of England 108

109 Middle East Handbook 2017 AECOM Weights and measures Metric measures and equivalents Length 1 millimeter (mm) = 1 mm = in 1 centimeter (cm) = 10 mm = in 1 meter (m) = 100 cm = yd 1 kilometer (km) = 1000 m = mile Area 1 square centimeter (cm 2 ) = 100 mm 2 = in 2 1 square meter (m 2 ) = cm 2 = yd 2 1 hectare (ha) = m 2 = acres 1 square kilometer (km 2 ) = 100 ha = mile 2 Capacity/volume 1 cubic centimeter (cm 3 ) = 1 cm 3 = in 3 1 cubic decimeter (dm 3 ) = 1000 cm 3 = ft 3 1 cubic meter (m 3 ) = 1000 dm 3 = yd 3 1 liter (liter) = 1 dm 3 = 1.76 pt 1 hectoliter (hl) = 100 liter = gal Mass (weight) 1 milligram (mg) = grain 1 gram (g) = 1000 mg = oz 1 kilogram (kg) = 1000 g = lb 1 tonne (t) = 1000 kg = ton USA measures and equivalents USA dry measure equivalents 1 pint = UK pint = liter USA liquid measure equivalents 1 fluid ounce = UK fl oz = ml 1 pint (16 fl oz) = UK pt = liter 1 gallon = UK gal = liter Imperial measures and equivalents Length 1 inch (in) = 2.54 cm 1 foot (ft) = 12 in = m 1 yard (yd) = 3 ft = m 1 mile = 1760 yd = km 1 int. nautical mile = yd = km Area 1 square inch (in 2 ) = cm 2 1 square foot (ft 2 ) = 144 in 2 = m 2 1 square yard (yd 2 ) = 9 ft2 = m 2 1 acre = 4840 yd 2 = m 2 1 sq mile (mile 2 ) = 640 acres = 2.59 km 2 Capacity/volume 1 cubic inch (in 3 ) = cm 3 1 cubic foot (ft 3 ) = 1728 in 3 = m 3 1 fluid ounce (fl oz) = ml 1 pint (pt) = 20 fl oz = litre 1 gallon (gal) = 8 pt = litre Mass (weight) 1 ounce (oz) = grains = g 1 pound (lb) = 16 oz = kg 1 stone = 14 lb = kg 1 hundredweight (cwt) = 112 lb = kg 1 ton = 20 cwt = tonne Temperature conversion C = 5/9 (F 32) F = (9/5 C)

110 AECOM Middle East Handbook 2017 Basis of construction costs General notes The building costs for the respective asset types are averages based on competitive tenders analyzed by AECOM. It must be understood that the actual cost of a building will depend on the design and many other factors and may vary from the figures shown. Due to the volatile nature of the current market, it is possible that tenders will be received outside these ranges. Professional advice should be sought for specific projects. Relative costs of construction are based on typical build costs in USD. Influence of foreign exchange fluctuations, unique site conditions, design attributes and applicable tariffs must be considered when comparing actual projects. The standard for each building varies from region to region. General and specific cost inclusions and exclusions are listed below. Basic specification of assets Asset type Residential Typology Low rise Mid rise High rise Specification Key design characteristics Basic, medium and high Basic, medium and high Basic, medium and high Building height G+1 to G+3 G+4/5 to G+20 G+20 and above GIA 80, ,000 50,000-80, ,000 BUA 85, ,000 55,000-90, , ,000 Effciency (%) % 80-85% 70-80% Units per core Wall:Floor ratio Net to gross % 75-85% 65-75% GIA per unit m² m² m² Asset type Typology Specification Offces Key design characteristics Low rise (shell and core) Basic, medium and high Mid rise (shell and core) Basic, medium and high High rise (shell and core) Basic, medium and high Building height G+1 to G+5 G+5 to G+20 G+20 and above GIA (m²) 10,000-25,000 25,000-75, , ,000 BUA (m²) 13,000-30,000 30, , , ,000 Effciency (%) 70-85% 70-80% 70-80% Wall:Floor ratio Net to gross 50-60% 50-60% 50-70% Slab to slab height m m m Grid spans 7-12m 9-12m 9-12m 110

111 Middle East Handbook 2017 AECOM Asset type Retail Typology Community Regional Super regional Key design characteristics Finishes Mid range High High GFA (m²) Not exceeding 30,000 30, ,000 > 100,000 General cost inclusions Construction works Main contractor preliminaries and OH&P Asset type Typology Industrial Light duty factory Heavy duty factory Light industrial unit (LIU) Specification Basic Basic Basic Basic Key design characteristics Building height GIA 10,000 20,000 6,000 G Data center Tier 3 Wall:Floor ratio ,000 Asset type Hotel Typology Budget Mid market Up market Resort Specification Basic Mid range Luxury High end Key design characteristics Building height G+10 G+10 G+15 G+6 GIA 16,000-18,000 13,500-15,500 56,000-60,000 39,000-41,000 Effciency 70% 75% 75% 55% Functional units General cost exclusions External works and landscaping Site infrastructure Enabling works Basements and car parks (incl. Podium) Contingencies Undefined provisional sums Utility connection charges Statutory fees and charges Professional fees Client direct costs Land acquisition Finance charges LEED silver or above Staff accommodation Pre-opening expenses Mock ups Asset type Schools Healthcare Typology Primary/secondary academy District hospital Specification Mid range Mid range Key design characteristics Building height (m) GIA (m²) 21,000-22,000 50,000 No of lift core 1 4 No of stair core

112 AECOM Middle East Handbook 2017 Additional inclusions and exclusions by asset typology Asset class Cost inclusions Cost exclusions Residential Commercial offces Fit out (commercial offces) Retail Industrial (light duty factory) Data centers Hotel Healthcare, education Fit-out works MEP services Installations Lift services Installations Internal finishes lobby and core areas only Fit-out works lobby and core areas only MEP services installations lobby and core areas only Lift services installations Fit-out works architectural Fit-out works MEP services Specialist installations (AV, IT, security) FF&E Front of house fit out Loose furniture and operators equipment Kitchen and laundry equipment Active IT equipment Internal services FF&E Fit-out Loose furniture and operators equipment Kitchen and laundry equipment Active IT equipment Internal finishes to offces MEP services installations to offces Active IT and phone equipment. Active IT and phone equipment. Tenant fit out Storage/racking systems IT and CCTV active equipment OS&E Production, process and laboratory equipment Waste water treatment plant, compressed air plant Process water and drainage systems N+1/2 redundancy Humidity/environmental control/conditioning other than standard air conditioning Ultra flat slabs Active equipment FF&E Utilities outside the building outline Modular construction (based on one complete data centre) Fixed fit-out works only All loose fit out and ICT All medical equipment 112

113 Middle East Handbook 2017 AECOM Orbital Highway Doha Qatar 113