Singapore construction outlook “cautiously optimistic
UK-headquartered construction consultant Turner & Townsend has submitted a “cautiously optimistic” outlook for the Singaporean construction sector, with recovery led by public sector projects.
It said in its Singapore Market Insight Report that construction activity in 2021 will continue to be driven mainly by the public sector at 65%, up from 62% in 2020.Â
Prospects for construction demand is expected to improve, albeit only marginally. The Building and Construction Authority projects construction demand for 2021 to be between S$23 billion and S$28 billion.
“We anticipate a low demand for new office and retail developments with opportunities for more office re-stacking and consolidation fit-out works, as companies consider more flexible working models to ensure the relevance of office workspace,” Turner & Townsend said.
While construction output is due to rise to the range of S$24bn and S$27bn in 2021, up from S$19.5bn last year, this increase will be largely attributed to the backlog created during the pandemic.
“We foresee further industry consolidation and Singapore’s construction supply chain to face continued challenges with upstream and downstream disruptions,” the company said.
Khoo Sze Boon, Managing Director, Singapore said: “Singapore’s construction industry remains one of the most severely affected sectors hit by the COVID-19 pandemic. As we continue down the path to recovery with vaccination programmes in progress and the number of cases under control, it is imperative that the construction sector rebuilds itself through collaboration and innovation.
Market snapshot: The state of facilities management contracting in the Gulf
The genesis of facilities management (FM) can be traced back to the 1970s when it was a little more than a janitorial and caretaker service focused on building maintenance and cleaning. Then, cost-cutting by businesses in the 1970s and 1980s led to the outsourcing of non-core services such as lighting, heating and plumbing.
In the 1990s, services like property management, space planning and relocation were added to FM services and a decade later business processes including payroll and human resources also made it to that growing list. These ‘integrated facility management’ (IFM) service contracts gained increasing market share over providers of single services.
Different levels of maturity
Mature markets have a greater understanding of their needs and have set up robust service level agreements (SLAs) driven by key performance indicators that are typically performance-based and output-driven.
The UAE’s more mature FM market is becoming fiercely competitive and price sensitive, further compressing already thin margins.
These came into being in 2015 and typically cover asset, condition, operations, maintenance, contracts and supply chain management, besides financial planning and HSE, to name a few.
TBC’s portfolio consists of 7,000 schools and several hundred office administration buildings. It will oversee the construction of new schools and provide asset management for the Saudi Ministry of Education.
Looking into the future
With crude oil prices reaching US$65/barrel, growth is expected in the Gulf’s FM sector.
The prime source of Gulf states’ earnings, oil prices were hovering at around US$80/barrel five years ago but have since seen a downward slide due to Covid-19, reaching as low as US$20/barrel.
FM has definitely taken hold in the region. In the UAE, Hill International had just one dedicated FM staff member in 2016, but now has 200.
Growth has been even faster in Saudi Arabia, where Hill had just one FM specialist in 2019, with between 50 and 60 today.
“Hospitality will win through”: A view from Dubai amid
In March, Paul Boldy FCIOB became the Middle East managing director of RLA Global, an advisory and management consultancy to the leisure and hospitality sector. A 17-year veteran of Dubai property and construction, he tells GCR how the pandemic has affected the hospitality sector and what the next few years will bring.
Visionary leadership in the Gulf Cooperation Council (GCC) has meant that innovation and strategic growth have become watchwords for the region and, as such, there is still an underlying optimism for recovery and for a stronger outlook.
A repositioned or renovated hotel will increase an asset’s value and, with the real estate sector still showing positive growth, hotel real estate investment remains strong.
How has the pandemic affected the hospitality real estate market?
Like all sectors, the Gulf’s hospitality sector has been impacted by the pandemic. From projects under development to operational hotels, the region has experienced delays and falls in occupancy.
It is certainly true that projects have had to be rethought, budgets cut, and business models reassessed, but hospitality will win through; people will want to travel, and the region has exciting prospects in store with the current and planned developments.
And what has been the effect on construction projects?
We have seen casualties in the contracting market, and some notable exits, with consequences on supply chains and financial institutions causing liquidity issues for suppliers, contracting parties and developers alike. The upshot is an obvious rise in project delays and contractual disputes.
The new hotel pipeline in the region remains strong with Saudi Arabia leading the development, closely followed by the UAE.
What developments should we be looking out for in the Gulf’s hospitality sector in the next few years?
The hospitality sector’s response to the pandemic has been inspiring. We’re working on projects now that will shape the sector’s landscape for years to come.
Operators are shaping new concepts to take account of the changes and finding ways to reduce costs, whilst maintaining or increasing guest satisfaction, the essence of added value.
Another trend impacting construction projects are the various smart city initiatives. Connectivity within hotels has typically been high on the list of guest frustrations. Technology is now being put at the forefront of the guest experience as the region embraces all things ‘smart’.
What is your three-year outlook for Gulf’s hospitality real estate, and what is driving change?
We will continue to see progress on the Saudi giga projects, rolled out as part of Vision 2030, including Neom, the Red Sea Project, Qiddiya, Diriyah Gate and Amaala. They will provide a major boost to the construction sector as well as tourism, hospitality and leisure.
The launch of Dubai 2040 Master Plan signals the country’s intent to make Dubai one of the world’s best cities to live and work, with major initiatives centred around the public realm, the planning of which will add a new dimension to the hospitality sector and drive the change in how we shape and define projects for both the domestic and international markets.
You’ve been in Dubai for 17 years. Can you give us a flavour of how things have changed in that time?
I’ve witnessed incredible changes over the years. From record breaking structures like the Burj Khalifa, to man-made islands such as the Palm Jumeirah, Dubai has pushed forward with ambitious and innovative plans.
I have also witnessed the Emirates’ hospitality sector grow to be a global player. Dubai became the benchmark for the region and still holds an enviable position with sustained occupancy and iconic projects and developments inspiring the rest of the region and the world.
Events such as Expo 2020 will further enhance, and provide a substantial boost, for the region’s tourism, and with the 50th Anniversary of the UAE in 2021, and the launch of the 2040 vision, I have no doubt that the place I call home will continue to prosper and inspire generations of Emiratis and expatriates alike for years to come.