Construction analysis
Strong activity. Changing risk.
Sector activity
The UAE construction pipeline remains substantial, with demand spread across a wide range of sectors.
Data centres
Data centres are a major growth area. Investment in AI infrastructure, cloud computing and digital transformation is driving demand for new capacity. High levels of investment are expected over the next decade.
Hospitality
Major hospitality projects continue to progress. In the near term, regional uncertainty is affecting visitor numbers and hotel performance.
This has not led to a slowdown in development. Some operators are using quieter trading conditions to carry out refurbishment and improvement works. Ritchie Davidson, our global hospitality lead, discussed this in his AGBI column.
Long-term projects are also supporting confidence. The planned Disney theme park resort on Yas Island, for example, is expected to drive further investment and development around the destination.
Other key sectors
Investment remains strong across aviation, transport infrastructure, industrial and logistics. The expansion of Al Maktoum International Airport is supporting aviation activity. Investment in Etihad Rail is also driving construction demand and improving connectivity, alongside continued investment in road infrastructure.
A substantial pipeline of residential projects continues to progress through to delivery, including developments where properties have already been sold off plan. Developers are taking a more cautious approach to bringing new projects to market.
Pricing and risk
Regional uncertainty is making contractors more selective about the terms they are willing to accept. So far, this is affecting prices more than supply chains, with rising freight, supplier and insurance costs adding pressure.
Contractors are less willing to accept long-term fixed-price risk. Tenders carry more qualifications and price-validity periods are shorter. For some materials, particularly steel, prices may only be held for around 30 days. Fluctuation clauses are also becoming more common on longer programmes.
Cost pressure is most evident across MEP systems, electrical infrastructure, façades, steel and aluminium. Strong demand from data centres is adding pressure to specialist electrical and cooling equipment. Their reliance on steel, copper and aluminium also increases exposure to changes in price and availability.
The bigger shift is in how commercial risk is shared. Passing risk down the supply chain does not make it disappear. Contractors will reflect that risk in their pricing. Clients are therefore looking more closely at how risk is shared and what contractors and suppliers can realistically deliver.
Budgets and contingency allowances should be tested regularly against current market conditions. Short-term changes in energy, shipping and material costs can increase construction costs without signalling a longer-term inflation trend.
Programme and delivery
Programme pressures increasing, with extension-of-time claims becoming more common. Contractor capacity, supplier performance and access to specialist materials and equipment are all putting programmes at risk of delays.
Clients should test contractor resourcing against programme commitments, rather than relying on assumptions made at tender stage. The performance of key suppliers should also be monitored throughout delivery.
Long lead times for specialist materials and equipment should be built into programmes early. Potential issues should be identified before they affect key milestones.
Cost and programme certainty need to be considered together. Delays can affect revenue generation and investment returns. This makes programme certainty as important as the price secured at contract award.
What clients should do now
Regional uncertainty is likely to influence commercial decisions in the near term. But the fundamentals of the UAE construction market remain strong.
Reliable market intelligence, benchmarking and scenario planning can help clients identify where risks are emerging, test assumptions against current conditions and make informed decisions with greater certainty.
Keep budgets aligned with the market
Market uncertainty makes timely decisions more important. We’re seeing shorter price-validity periods. In one example, steel prices were held for only 30 days. Shorter validity periods can quickly affect project budgets and contingencies.
Clients should regularly validate budgets against current market conditions. Benchmarking can help them understand whether budgets remain realistic or if contingency allowances need to change.
Make procurement decisions early
Procurement strategies should also be set early. On projects, we’re finding that delays to key procurement or commercial decisions can increase uncertainty. This is particularly important where specialist equipment, contractor capacity or supplier availability could affect delivery.
Early engagement with contractors and specialist suppliers can help test pricing, resourcing and lead-time assumptions. It also gives clients time to adjust the procurement strategy or programme.
Programme certainty is as important as the price secured at contract award.
Take a balanced approach to risk
Risk allocation also affects pricing. In the current market, contractors are qualifying tenders more heavily and seeking fluctuation clauses. Passing risk down the supply chain does not make it disappear. Contractors will reflect that exposure in their pricing. Clients should consider how they share risk across the project team. A more balanced approach can help secure more competitive pricing and improve delivery certainty.
Spot delivery pressure before it escalates
For projects already in delivery, we’re seeing greater programme pressure, including more extension-of-time claims. Contractor capacity, supplier performance and access to specialist materials and equipment are creating delivery risks. Clients should regularly review cost, programme, contractor resourcing and supplier performance. This can help them identify pressure early and respond before it affects key milestones.