Challenges facing the Construction Industry (MENA) Post Pandemic 2021

As the world economy struggles to recover from the pandemic, the vaccination drive spells hope for normalcy. The construction sector in the MENA region is on the road to recovery in 2021. Moreover, there are forecasts of a promising medium-term outlook by leading global data analytics firms. However, a few challenges abound that could affect the speed of recovery.

The construction output growth forecast for the Middle East and North Africa (MENA) region for 2020 is forecast to contract by 4.5% in 2020, before recovering with the growth of 1.9% in 2021 and 4.1% in 2022, according to GlobalData, a leading data, and analytics company.

Core construction industry challenges are lack of skilled labor, increasing cost of raw materials, stiff competition, and reducing profits. Moreover, Occupational Safety and Health Administration (OSHA) regulations to protect staff from hazards have the organizations spend efforts in that direction.

Significant challenges facing the Construction Industry (MENA)

Among the many challenges, some of the major ones are as follows:

• Shortage of Skilled Labor (Higher Demand for Skilled Labor)

The pandemic led to the labor force in the MENA region leaving for their home countries in 2020. The MENA region is back bustling with construction activities but faces a few challenges in labor. The construction industry in the UAE has a growth forecast of 3.1% in 2021, as per ResearchAndMarkets. The UAE government persists with its infrastructure plans, with various initiatives such as the Energy Strategy 2050, the Sheikh Zayed Housing Program, and the Dubai Tourism Strategy.

The industry revival has led to an increase in construction projects. As a result, the number of sector-wise job openings has increased but faces a shortage of skilled labor. Skills in demand like civil engineers, technicians, architects, and labor impact the progress of construction projects today, besides project deadlines and costs.

• Rising Cost of Raw Materials

The price of building materials has increased by 25-30 percent in the UAE. Examples include – Steel prices up from Dh1,800 a ton to Dh2,600, white wood up from Dh600 to Dh1,000.) Besides this, freight rates have also increased by four times in some cases for containers.

Rising costs impact the margins of construction projects and delay the availability of needed materials to meet project timelines. Construction companies are seeking quality materials, and expenses in today’s scenario constitute a significant concern.

• Need for Higher Safety Standards

The construction industry in the MENA region suffers from safety hazards for construction sector workers. Unfortunately, the sector is leading in worker deaths and injuries. Therefore, organizations need to put safety measures in place and adequate training to safeguard workers.

Some Middle East Safety Statistics gives us some insights:

• 69% of construction companies in the Dubai Municipality lack understanding of the importance of health and safety (source)
• 74% of workers in Dubai believe their training is outdated when they do receive it (source)
• 71% of workers have no way of reporting accidents in Dubai (source)

Implementation of Safety standards for the protection of workers is essential. Ongoing training and refresher sessions should be a regular activity to ensure that construction workers are accident-free. Construction companies need to implement OSHA regulations for compliance. A transient labor force in the MENA region adds to these challenges.

• Sustainability and Efficiency

The Building and construction sectors combined are responsible for 39% of all carbon emissions globally, with operational emissions (from energy used to heat, cool and light buildings) accounting for 28% as per reports from the World Green Building Council.

Construction firms must go for LEED certification (Leadership in Energy and Environmental Design) and encourage the construction of energy and resource-efficient buildings that are healthy to live in.

Implementation of initiatives for achieving zero carbon goals is critical. Some of them targeted for 2050 include decarbonization strategies, using carbon-neutral products, committing to fossil-free construction sites, etc.

Construction costs of green buildings are about 5% higher than conventional homes. The difference in costs gets covered within the first 3-4 years, with a reduction in operational costs. With the current global economic scenario, it could take a while for these initiatives to gather momentum after the pandemic. As a result, potential delays to sustainability and healthier living timelines are possible.

• Delays in Projects Completion

Construction projects face traditional delays due to change in project scope, design variation, inaccurate estimation, and so on.

Unpredictable lockdowns and movement restrictions due to the pandemic have delayed construction projects. However, post-pandemic, lack of resources, and shortage of construction materials have added to the delays. Project delays impact costs and profit margins of construction companies.

The Way Forward

The forecasts for growth of the Al Muqarram Group is at 20% each year.

The construction industry in UAE faced a decline of 4% in annual registered data in 2020. But post-pandemic recovery forecasts a strong rebound in 2021, with an average growth rate of 3 to 4 % due to the new ‘Strategic Changes.’ In addition, the implementation of the latest building code will usher in many rules and policies that will work positively in favor of the construction industry.

All these will enable streamlining construction industry processes to reduce the cost of construction. There will be an increase in technological intervention through innovation in construction technology. The group has a strong forecast each year from 2021 to 2026, with estimated record growth numbers of 3.5%

Despite the challenges facing the construction sector, the construction sector in MENA will see an uplift towards the last quarter of 2021. Normalcy is returning, and the economy is back to the revival path in 2021, which will boost the MENA construction sector with positive outcomes.