Middle East Handbook 2014

8/10/2019 Middle East Handbook 2014

http://slidepdf.com/reader/full/middle-east-handbook-2014 1/90

Property and Construction Handbook

2014 Edition

Middle EastHandbook



2 Middle East Handbook 2014

Disclaimer

This report has been prepared solely for information purposes. Whilst every endeavor has been made to obtain

the best available data from appropriate sources, AECOM can give no guarantee of accuracy or completeness.Any views expressed in this report reflect our judgment at this date, which are subject to change withoutnotice. Current forecasts involve risks and uncertainties that may cause future events to be different to thosesuggested by forward-looking statements. No investment or other business decision should be made solely onthe views expressed in this report, and no responsibility is taken for any consequential loss or other effectsfrom these data. Advise given to clients in particular situations may differ from the views expressed in thisreport. Reproduction of this report in whole or in part is allowed subject to proper reference to AECOM.



3AECOM

Welcome to the eighth edition of theMiddle East Construction Handbook,this year developed as a supplement toAECOM’s inaugural International Propertyand Construction Handbook (Blue Book).We hope that you will find this year’sselection of articles, references and costdata of value.

Our economic round-up starts with a lookat the state of the global constructionindustry, the risks and opportunitiesprevalent in each continent and keytrends such as the growth of megacities. In 2014, to inform our sectionon the Middle East constructionmarket, we conducted our first MiddleEast Construction Survey of industrystakeholders. The survey provided insightinto the current and future shape of theconstruction industry as expressed byindustry stakeholders in the region. Theresults reiterated the mixed performanceof the year, judged against the highexpectations for the region, but alsoemphasized that the opportunities in theregion remain strong, as reflected by theoptimistic expectations of those surveyed.

Our articles section starts with a lookat the theme park industry, as we see acontinuation of event and destinationdriven developments being used asa catalyst for wider economic growthand development activity. In line with

this theme, our second article looks atthe complementary hospitality sector,specifically hotel refurbishment and thesuccess factors required to maintainand increase competitiveness of assetsas they progress through their lifecycle.We conclude our article section byproviding a framework for successfulimplementation of risk management.

As our 2014 industry survey shows theMiddle East construction industry stillhas some way to go before it can have realconfidence in its ability to manage risks.We conclude with our reference articles,our international and regional cost dataand a brief overview of our Middle EastConstruction Survey.

We hope you find the information andanalysis in the Blue Book and this MiddleEast Supplement of interest and value.As with previous years we continue toseek feedback to support our drive forimprovement in everything we do. Pleasecontact the authors; Hamed Madani,Maren Baldauf-Cunnington and MargreetPapamichael via [email protected] for further information and to take

part in the 2015 Middle East ConstructionSurvey.

FOREWORD



4

1

ECONOMIC ROUND UP

7 GLOBAL CONSTRUCTION – OPPORTUNITIES ANDRISKS

15 MIDDLE EAST CONSTRUCTION REVIEW

32 COUNTRY STATISTICS

2 ARTICLES

25 1. THEME PARKS: SUCCESS FACTORS ANDCHALLENGES

38 2. OPTIMIZING THE VALUE OF HOTELS — THE CASEFOR REFURBISHMENT

46 3. RISK MANAGEMENT

3REFERENCE ARTICLES

52 1. PROCUREMENT ROUTES

55 2. MIDDLE EAST FORMS OF CONTRACT

59 3. BUILDING REGULATIONS AND COMPLIANCE

4REFERENCE DATA

65 GLOBAL UNITE

67 INTERNATIONAL AND REGIONAL COST DATA

70 MIDDLE EAST INDICES

80 BUILDING SERVICES STANDARDS

81 EXCHANGE RATES

83 WEIGHTS AND MEASURES

5 ABOUT AECOM’S MIDDLE EAST

CONSTRUCTION SURVEY

6

DIRECTORY OF OFFICES

MIDDLE EAST HANDBOOK



5AECOM

About AECOM Middle East

For nearly 50 years, we have been workingin the Middle East to create a bettertomorrow.

We understand cities — how they work,how they grow, and how they thriveacross the built, social, economic andnatural environments they comprise. Wedraw on our fully-integrated planning,

design engineering and architecture,construction and managementcapabilities to help make the region’scities world class.

With over 4,000 staff in the GCC regionwe are changing the face of constructionby advancing the most essential cityinfrastructure projects. In Qatar theseinclude Doha’s New Port Project andAshghal’s Expressways program inaddition to the management of Al Rayyanand design of Al Wakrah FIFA 2022World Cup stadia and precincts, whichare helping to establish Qatar as aninternational sports venue.

In Saudi Arabia we are supportingJeddah’s transformation into a safe,accessible and sustainable city viathe Jeddah Strategic Plan, the JeddahStormwater Drainage Program and theprogram management of the JeddahPublic Transportation Program.

AECOM has been developing cities in the

UAE since 1965 and been responsiblefor many of the country’s leadinginfrastructure and building projectsincluding currently, the constructionmanagement of Abu Dhabi’s MidfieldTerminal.

At AECOM our strength is our people.Our project teams of locally-basedprofessionals are backed by AECOM’sglobal resources. Together we offer clientsthe advantage of international multi-disciplinary project collaboration.



6

ECONOMIC

ROUND UP

01



7AECOM

Global construction –Opportunities and Risks

The global construction sectorcontinued to recover in 2014 from therepercussions of a multi-year economicand financial crisis. In contrast to 2013,when global construction growth wasstill mainly driven by an outperformingAsian market, large Western constructionmarkets, such as the US or the UK nowappear to contribute more significantly

to the global expansion.

Opportunities

Aging infrastructure in advancedeconomies and the need to fillinfrastructure gaps in developingeconomies will be the main drivers forconstruction investment growth overthe coming years. In 2014, the globalconstruction industry is estimated to beworth US$ 9.4 trillion, which is expectedto grow to just under US$ 12 trillion in2020 representing a compound annualgrowth rate (CAGR) of 4 percent (FIGURE1). This overall growth outlook masksstark differences between markets.Prospects remain mixed with greaterrecovery in some regions, while others

are likely to slow or even stagnate in thenear term.

Pent-up demandThe majority of growth is still expectedto come from emerging markets, whereurbanization and demographic changesare driving investment need acrosssectors. That said, the developingcountries’ share in global construction islikely to have peaked and may stabilizeover the next decade. Whilst the large

gains made since 2007 were due tolarge-scale infrastructure investments,it was also a cause of the massive dropoff in investments in the developedmarkets during the financial crisis. Someof these countries hit by the crisis, mostnotably the US, are now expected tomake a greater contribution to globalconstruction growth, spurred by pent-updemand from years of subdued capitalinvestments and needed investment incore sectors, such as oil and gas, andinfrastructure.



8

FIGURE 1: GLOBAL CONSTRUCTION PROSPECTS

Urbanization and the growth ofmega-cities

The pace and scale of urbanization, andby extension, the greater concentrationof population is putting transport andutilities systems under strain, whileincreasing the need for housing andsocial infrastructure. Responding to theneed to create efficient and sustainablecities is one of the largest challengesfacing economies, governments and theengineering and construction sector alike.

A city’s growth will be one of the maindrivers for construction demand. Theeconomic weight of cities varies across

Source: AECOM, various Government Statistics, IHS Global

regions, but typically mega cities makea large contribution to country’s growth,

providing a high share of employmentopportunities (FIGURE 2). Together withcompetition for skilled labor this is leadingto higher average incomes compared tothe rest of a country, meaning that citiestypically have a stronger consumer base.This is particularly true in developingeconomies. The urban population andrising middle-to-high income householdswill demand better connectivity, efficientenergy, water and sanitation services andhigh-quality social infrastructure.



9

FIGURE 2: ECONOMIC WEIGHT OF CITIES

Source: Brooking Institute, World Atlas, IMF

Industrial needsThe manufacturing sector is a major

demand driver in both emerging anddeveloped economies. Buoyed by theadoption of new technology and thediscovery of new reserves, countries likethe US, Canada and Brazil have alreadystarted to invest heavily in the oil andgas industries. This in turn is increasingdemand downstream into the heavymanufacturing sectors, such as petroleumrefining and chemicals, as well as newtransportation and storage facilities.

Demographic changeDemographics play a key role in infra-

structure demand, whether for education(for young and growing populations suchas the Middle East and Africa) or health-care (aging populations such as Europe).In addition, the growing number of urbanmiddle-class households in emergingmarkets is pulling infrastructure invest-ment towards consumer-facing sectors,including those needed for manufactur-ing and logistics, as well as those in-creasing connectivity, such as trans-portation.



10

FIGURE 3: INTERNATIONAL BUSINESS RISKS

Source: AECOM, IMF

Risks

Significant global disruptions couldclearly alter growth projections. Giventhe international nature of clients,investors and the construction supply

chain, external risks, whether economic,political or environmental, are aconstant, if not growing, concern for thedelivery of projects, affecting projects’

and companies’ success and businesscontinuity (FIGURE 3). Risks across a widespectrum not only affect the viability ofnew and existing investments, but also

funding availability, growth opportunitiesin a country’s market, as well as businesscontinuity of the supply chain.

Economic

Societal +technological

Environmental

Political

• Greater incidence of naturaland man-made disasters

• Greater incidence of extreme

weather

• Water shortage + food crisis

• Pandemic outbreaks

• Uncontrolled urbanization

• Extreme political and social instability

• Data fraud

• Breakdown in critical infrastructure and networks

• Public finances in key economies

• Cost of raising capital and

competition for funds

• Oil price shock

• Failure of finanical markets or a

major institution

• Regulatory and economic instability

• Increased geopolitical instability

• Inter-state conflicts/ war with regional

impact

• Governance failure in key economies

• Increased corruption and red tape

• Large-scale terrorist attacks

The construction industry is risk prone, with complex and dynamic project environments creating an uncertain operatingenvironment and outlook. Globalization has offered new opportunities for organizations in the construction sector to enterinternational construction markets. At the same time, increased internationalization has made the industry vulnerable to varioustechnical, sociopolitical and environmental risks. These risk factors, which can have a large impact on operations and businessperformance, are largely external to companies and thus are often outside the direct control of the management.



11

Asia-Pacific

Construction spending in Asia-Pacificaccounted for 44 percent of total globalconstruction spending in 2013, ledby China – the largest construction

market in the world - Japan, India, andAustralia (FIGURE 4). AECOM’s 2014Asia Construction Outlook highlightedthe construction industry’s expectationthat despite somewhat slower growth,the Asian market remains one of thekey focus for investment. Infrastructurerequirements remain enormous andtransport, utilities and greater investmentfor manufacturing and logistics are among

the main priority areas.

Amid broadly positive prospects acrossthe region, China, India and Indonesiaare considered to be the most promisingmarkets, along with growing opportunitiesin the Philippines and future potentialin Myanmar. Despite the recent cuts incapital spending, China’s expenditure

plans are still significant, dwarfing allother regional countries.

Following the 2011 earthquake andtsunami, Japan, in a bid to reconstruct andrevitalize the economy introduced wide-ranging economic reforms. This included theFourth Science and Technology Basic Plan,which set out spending of US$ 313.3 billionover 2011–2015 to address demographic

challenges and reconstruction efforts. Inaddition, in January 2013, the governmentannounced an emergency stimulus packageof US$ 110 billion, which focuses on publicwork infrastructure, such as repairs andthe construction of earthquake-resistanttransport and energy infrastructure.Consequently, the outlook for the Japaneseconstruction sector is brighter than it has

been for many years. However, given thefiscal state of the country, constructionprospects will hinge on the Japanesegovernment’s ability to deliver theseprojects.

Apart from the well established largeconstruction markets in the region, suchas South Korea and Malaysia, there areother fast growing construction marketsthat are potential hot spots. Indonesia,the world’s fourth most populous country,is fast becoming a major construction

market. Others, such as Vietnam,Philippines and Myanmar are expected tobe among those with the strongest growthpotential. Political risks, public financesand bottlenecks in project execution arethe main risk to realizing the potential ofthese markets. India could prove a fastergrowing construction market than Chinaover the medium-term, if provisions are

made to meet the demands of a large andgrowing population.

Source: AECOM 2014 Asia Construction Market Outlook,

Various National Accounts

47%

19%

11%

7%

6%

4%

China

Japan

India

Indonesia

Australia

Korea

Taiwan

Thailand

Malaysia

Philippines

Bangladesh

Singapore

Hong Kong

Market Share of Construction Spending

FIGURE 4: ASIA-PACIFIC CONSTRUCTION MARKET



12

North America

North America is expected to account fora significant proportion of the increasein developed world construction volumesover the next few years (FIGURE 5). After

a six-year decline, the US constructionmarket started to slowly recover in 2012and this is expected to continue, withgrowth picking up substantially thisyear. The residential building marketis expected to see strong gains, while

healthy fundamentals in the non-residential sector are widely expected tobenefit commercial and industrial buildingactivity.

In both the US and Canada, shale gasand oil has led to increased investmentin infrastructure and constructionof facilities related to extraction andtransport.

growth. For example, Panama is benefitingfrom the Panama Canal expansion anddevelopment of the Colón FTZ. In Brazil,the region’s largest construction market,work has been delivered for the 2014 FIFA

World Cup, while projects associated withthe 2016 Olympic Games are underway. Inthe medium-term, progress with regardsto energy and infrastructure-related

Source: US Census, AIA Consensus Forecast

With the economy finally stabilizing, the construction outlook should finally see a substantial improvement

200

400

600

800

1,000

1,200

1,400

2006 2007 2008 2009 2010 2011 2012 2013 2014f 2015f 2016f 2017f

U S $ ,

b i l l i o n

Nonresidential Residential Total Construction

FIGURE 5: US CONSTRUCTION ACTIVITY

Latin America

Latin American construction growth asa whole is expected to lag behind globalaverage growth rates over the years,but some parts the region will performbetter than others (FIGURE 6). Chile and

Colombia are widely expected to performbest, with the countries benefiting froma more liberal business environment.Smaller markets are seeing substantial



13

projects will determine the constructionindustry’s fortunes. Regionally, reformsare needed to target infrastructure gaps,high and complex taxes and bureaucracy,and inconsistent regulations. If thesebottlenecks are addressed, the region’s

construction market could performstronger than currently envisaged.

Europe

Whilst an overall cyclical upturn inconstruction investment is expectedin Western Europe, growth is likely tobe moderate as public finances leavelittle scope for significant infrastructure

investments. Some countries are set toperform better than others (FIGURE 7). TheUK, Denmark and Norway are anticipated

Source: KHL

0%

2%

4%

6%

8%

2014f 2015f 2016f

A n n u a l %

World BrazilArgentina ColombiaChile

FIGURE 6: LATIN AMERICA

LATIN AMERICA CONSTRUCTION OUTLOOK

The outlook for the Latin American construction sectoris cautiously optimistic. Despite firm growth in a numberof smaller markets, the region as a whole is expected tounderperform global averages as large markets such as Brazilweaken post 2015.

to stand out from the rest of WesternEurope, with forecasters pointing togrowth of double that of the average ratein Western Europe.

The Central and Eastern European

counties are likely to see an upswing inconstruction activity over the next fewyears, led by infrastructure investments.The region is scheduled to receive anew wave of EU infrastructure fundingfor projects, as well as infrastructurefinancing from the European Commissionand other European institutions.

Russia was expected to perform muchbetter than many countries in the region,but a deteriorating business environmenthas now clouded the investment outlook.Whilst public finances are sound andable to provide funding for key projects,constrained access to capital and falling(foreign) private investment will impactthe flow of construction projects. Inaddition, EU sanctions on Russia affect

target loans from the European Bank forReconstruction and Development (EBRD)and the European Investment Bank (EIB),both of which are an important sourcefor the funding for Russian infrastructureprojects.

The outlook for the Turkish constructionsector has also been affected by investor

nervousness about social, political andeconomic headwinds. Nevertheless, thecountry’s market should be supported bybetter economic fundamentals comparedto its regional peers. Urbanization andpopulation growth is increasing demandfor residential and social infrastructure,while the country’s strategic positionas a natural transport hub is fueling in-vestment in transport systems, manufac-

turing and logistics facilities.



14

FIGURE 7: CONSTRUCTION GROWTH IN EUROPE

Source: Euroconstruct, June 2014, BMI

7.6 and more

5.1 to 7.5

2.6 to 5

0.1 to 2.5

0 to -5

-5 and less

Ireland

Hungary, Estonia, Turkey

Spain

2014 FORECASTConstruction growth, %

2015-16 FORECASTConstruction growth, %, per annum

7.6 and more

5.1 to 7.5

2.6 to 5

0.1 to 2.5

Ireland

Poland, Hungary

Portugal, Finland,Slovakia, Belgium,France, Germany, Italy,Switzerland, Spain,Austria, Czech Republic

Turkey, Estonia, Latvia,Denmark, Netherlands,Russia, Lithuania,Norway, UK, Sweden

Sweden, Poland,Switzerland, Lithuania,Germany

Denmark, UK, Latvia,Slovakia, Belgium, Austria,

Finland, Netherlands,Norway

Italy, Russia, France,Portugal,Czech Republic



15

Middle EastConstruction Review

AECOM Middle EastConstruction Survey

In 2014 we conducted our first MiddleEast Construction survey. The aim ofthe survey is to assess the state of theregional construction industry, examinethe drivers and barriers currently at playand to reflect on concerns expressed byour client organizations and other industrystakeholders.

The outputs of our survey has informedour review of the Middle East constructionindustry as outlined in this section.

Industry performance

Industry performance within the MiddleEast was mixed over the past year, with

the market reliant on an improvement inthe UAE construction sector, as reflectedin the project awards sighted by MEED(FIGURE 8).

In contrast, despite large spending plansin countries such as Saudi Arabia, Qatarand Kuwait, the flow of project awardsdisappointed, due in parts to slow

political decision making and revisitingof project scopes, highlighting the factand associated risk that much of theregion remains reliant on governmentspushing ahead with their investmentcommitments.

Our findings from the AECOM 2014 MiddleEast Construction Survey, reflects thegeneral divergent performance of theindustry within the region. A majority ofthose surveyed reported that industry

Source: MEED

As of August 2014

-

100

200

300

400

500

600

700

800

2010 2011 2012 2013 2014e 2015+ f

U S $ ,

b i l l i o n

Bahrain Iraq Kuwait Oman Qatar Saudi Arabia UAE

FIGURE 8: MIDDLE EAST PROJECT AWARDS + CURRENT PIPELINE



16

workload increased over the past year.However, despite the generally improvedindustry performance a significantproportion of respondents saw theircompany workload fall over the past year,in particular outside of the UAE. Politicaluncertainty, instability and securityconcerns in some parts of the regionhave led to a stagnation of work in thosecountries.

Positive views on growth

Looking forward, the vast majority ofrespondents to our survey are optimisticover future growth, in the industry as awhole and their companies’ prospects(FIGURE 9). In both cases the respondents

are ‘certain’ about their projections. Themost positive responses come frombusinesses in the UAE, while those in

Egypt and Kuwait are more doubtfulabout industry prospects. Such findingsare largely consistent with the tradingconditions in these countries.

In the UAE, there appears to be a generalconsensus that latent demand fromstronger economic growth and sentiment-driven demand boosted by expectationssurrounding Expo 2020, has led to morenew projects starting to emerge. Generally,the industry is expecting an ease infinancial restriction helping the flow ofgovernment-led projects and increasedability to obtain debt finance for projectspend. Workload expectations centeraround infrastructure and transport,such as aviation investments, while work

associated with the Expo 2020 is seenas a catalyst for real estate projects.Parallels are being drawn to the precedingboom-bust cycle. Opinions are divided

FIGURE 9: WORKLOAD EXPECTATIONS AND RISKS TO OUTLOOK



17

as to whether the increase in expectedproject awards is driven by fundamentalsor speculation and our survey shows thata small majority tends to believe that thecurrent growth is driven by a fundamentalimprovement in demand. Nevertheless,

there is some uncertainty surroundingcurrent demand levels, with a significantportion of the industry questioning itssustainability should sentiment turn.

In Qatar workload expectations centeraround preparations associated withthe 2020 FIFA World Cup and associatedinfrastructure investments, whichhave been impacted by recent newsof government plans to downsize thescope of the event, including reducingthe number of stadiums and DohaMetro scheme in an effort to cut costs(Source: MEED). Whilst economically itmay make sense to reduce the scale ofthe investments given the limited size ofthe country, it does create uncertaintyin the industry supply chain who have

been gearing up to support the work.Despite the slower than expected flowof project awards in Saudi Arabia overthe past 18 months, expectations arethat several large-scale transport andsocial infrastructure projects (such as theeducation built program) that have beendelayed will finally be executed.

While some of the industry’s players areoptimistic to achieve revenue growth wellabove the sector average, more companiesexpect that they may undershoot themarket slightly though they attach greatercertainty over their workload expectationsthan in wider market growth. Those thatexpect strong workload growth for theircompanies over the next three years citehaving rationalized and reorganized since

the recession as their main strength tocapitalize on the economic upturn. Somealso report that it is their mobility and

flexibility that is their greatest strength,allowing them to respond swiftly toupcoming opportunities.

Growth Areas

According to our research, constructionopportunities backed by real economic,social and global event needs are thedominant reasons for industry confidencein the region, with the supply chainseeking business across a number of big-ticket public capital projects. A low-taxenvironment, relatively low regulatoryrestrictions and stability of countries

are also cited as inducing businesses toinvest. Economic growth, urbanization andpopulation increases are placing pressureon water, electricity, transport and socialinfrastructure, and are considered keydrivers for industry demand.

Transport is seen as the dominant sectorby the construction industry which isenjoying a boom thanks to airport-related

work, metros in several cities and otherinitiatives. According to MEED thereare US$ 278 billion worth of transportprojects in the current award pipeline.However, whilst more than two-thirdssay that they expect strongest industrygrowth in rail, road, and airport relatedwork, just 38 percent of respondentsexpect their companies’ growth to

be driven by transport-related work(FIGURE 10). This year’s survey resultsconfirm that construction firms are stillheavily dependent upon governments’infrastructure plans for future growth,with two-thirds of respondents citingthis as the single most important marketdriver. Such reliance means that anypublic belt tightening could potentiallycut off a vital source of new projects.

Indeed, despite the large potential ofthe Kuwaiti construction market, theindustry continues to be hampered by



18

Source: MEED

EXPECTED PROJECT AWARDS 2014-16GCC + IraqProgressed projects only, Number of ProjectsTotal: US$ 876.7 billion

INDUSTRY GROWTH SECTORS VS. COMPANY PRIORITY SECTORS

32%

23%

24%

7%

5%

3%

2%

Transport Energy + Utilities

Mixed Use Residential

Industrial Healthcare

Public (civic + defense) Sport + Leisure

Commercial Retail

Education

0%

10%

20%

30%

40%

50%

60%

70%

80%

0% 10% 20% 30% 40% 50% 60% 70% 80%

C o m m p a n y t a r g e t s e c t o r s

% of Respondents Expecting Sector GrowthSize indicator: Expected Industry Growth

Source: AECOM 2014 Middle East Construction Survey

Growth Expectationvs Target Sectors

FIGURE 10: GROWTH EXPECTATIONS AND COMPANY PRIORITIES

political deadlock and the flow of projectscontinues to be slow.

Despite evidence of slow project flow,Qatar is still seen as the market with thelargest potential followed by the UAE. An

equal share of survey respondents viewSaudi Arabia, Qatar and the UAE as theirpriority growth markets over the next fewyears (FIGURE 11).

Source: AECOM 2014 Construction Survey

Industry perception of growth markets andcompanies' focus regions

0% 20% 40% 60% 80% 100%

Company Target Markets

Regional Growth Markets

Share of respondents expecting growth

KSA

Qatar

UAE

Iraq

Bahrain

Oman

Lebanon

Kuwait

Egypt

FIGURE 11: GROWTH MARKETS



as well as new services and productsofferings together with informationtechnology. (FIGURE 12).

Market pricing

Across the region, the pricing environmentremains very competitive and clientorganizations continue to press forthe best possible prices, often throughcompetitive bids followed by negotiation.Increased price levels are being soughtby contractors, but market evidence

highlights that competitive pricing isstill prevalent in the marketplace. Infact, pricing levels are keen for thoseprojects that are viewed favorablyby contractors, where a coherentprocurement framework is in place, risk isapportioned appropriately, or the projectis considered a ‘must-win’. Generally, theindustry reports that there is currentlystill plenty of capacity when it comes tolabour, though the market appears tohave shifted more to equilibrium withregards to capacity for building materials

and plant and equipment (FIGURE 13).Consequently, trends in tender prices overthe past year have ranged from relativestability, to a gradual upward shift incountries where industry volumes haveincreased.

Our industry survey shows that input costinflation in the region is currently drivenby wages. Concerns have been voicedin Saudi Arabia, where the constructionindustry has been impacted by theintroduction of the Nitaqat system,which has led to a reduction in the use ofexpatriate labour. Whilst the governmentexpects that constraint will be temporaryas local labor sources will be more widelyused, it has nevertheless disruptedworkflow over the past 18 months andadded to labor cost pressures.

FIGURE 12: COMPANY INVESTMENT PRIORITY TO

ACHIEVE GROWTH

AECOM 1 9

Growth Strategies and Investment Priorities

Respondents to this year’s global surveyappear to be open to new sources ofbusiness. Two thirds of Middle Eastconstruction firms say that they plan to

move into international markets with coreofferings, with Africa and the Americas themain target regions. Survey respondentssay that they are aware of the necessaryskills and knowledge needed withinthese new sectors and regions. Acrossthe industry, growth is expected tocome primarily through organic routes,though 25 percent believe mergersand acquisitions (M&A) will fuel such

expansion. Reflecting expectations ofindustry expansion, 79 percent of surveyrespondents expect their company toinvest in operational efficiency, while 50percent expect investment in recruitinga skilled workforce to meet businesstargets. Other priority investment areasare business and customer development,



20

FIGURE 13: CAPACITY IN THE BUILDING INDUSTRY

FIGURE 14: TENDER PRICES AND PROFIT MARGINS

Current Over next3 years




Share of Respondents

0

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Materials Plant & Equipment Labor - Contractors Labor -Consultants

Idle/ Plenty of capacity Balanced supply/ demand Strained/ No Capacity




-20%

0

20%

40%

60%

80%

100%

Last 12 Months

Balance of increase/decrease

Next 3 years

Increased >5%

Increased by up to 5%

No change

Decreased by up to 5%

Tender Prices

Increase by>10%

Increase by6-10%

Increase by1-5%

No change

Tender Prices

Profit Margins

Looking ahead, the industry expectscapacity constraints to emerge inparticular for key materials and

contracting labour. The constructionindustry across the region hasconsolidated significantly in recent years,increasing the possibility that pricescould come under significant pressure ifworkload expands to the levels expectedover the next few years, unless there isa marked increase in contracting andmaterials supply capacity.

Increased confidence and the psychologyof pricing on the back of higher workvolumes will see prices increaseaccordingly, though variation by marketswill remain (FIGURE 14).



21

Challenges + Risks

The focus on Building InformationModeling (BIM) and how this is impactingon project performance is seen asamong the key improvements in industry

practices over the past years in the region.In addition, the industry reports thatadvancements are being made in theprioritization of projects, transparencyand accountability, and business caseevaluation, which is helping the supplychain to invest in resources and planahead to deliver projects.

Of all the potential barriers to progress,

the biggest concerns are over politicalcontinuity in the context of geopoliticalrisks, resource availability and changesin government spending plans. Privatesector financing, risk management, andbureaucracy and regulation are alsoseen as major challenges to the regionalindustry.

1. Reliance on government investmentA large proportion of the Middle Eastconstruction sector remains heavilyreliant on public sector work, particularlyoutside the UAE. Despite the fact thatgovernment finances are generally strongthroughout the region (in the GCC), thereappears to be a lack of committed fundsin certain parts of governments in theregion. A lack of transparency in policy

making and changes to program scopesover the past year have added to industryuncertainty in a number of countries.In particular, the delivery market citesonerous bureaucracy as the mainchallenge, which delays the approvals andpermitting process and impacts clientdecision-making, which in turn affectscontractors and consultants’ cash-flows,

resourcing and workflow certainty.

2. Project finance diversificationFinancial strength of the GCC

governments means that public-financed projects continue to dominatein the region; and this trend is expectedto continue. However, in addition topublic spending, the large number ofconstruction projects planned for theregion over the next years means thatproject owners will have to attractan increased amount of funding. Thisis particularly crucial for Dubai if its

infrastructure and building plans are to goahead. Whilst investor confidence in theEmirate’s finances has certainly increased,banks, and in particular foreign banks,remain cautious given recent experienceof deep ‘haircuts’ and restructuring.Lenders will remain reluctant to commitfunds as government and related entities’finance positions remain opaque and

debt levels are perceived as still beinghigh. Alternative financing options arebeing explored to increase private financeparticipation, including various public-private partnership models, export creditagency guarantees, and raising funds atcapital markets. However, whilst attemptsto diversify funding sources are welcome,evidence of privately financed dealsremains patchy and more needs to be

done to convince the investor communityof project owners’ ability to proceed withthese projects (FIGURE 15).



22

SOURCES OF PROJECT FINANCE

Balance of Respondents

Local Banks

Main source of Project Funding

Expected Change in Finance over next 3 years

Government,Local

Authority

Private Funds

InternationalBanks

InstitutionalInvestors /Funds

Public PrivatePartnerships

0 %

1 0 %

2 0 %

3 0 %

4 0 %

5 0 %

6 0 %

7 0 %

8 0 %


BARRIERS TO PROJECT FINANCE

0% 10% 20% 30% 40% 50%

Risk Profile of Borrower

Risk Profile of Project

Level of pre-sales/pre-commitment

Loan to Equity Ratio

End Valuation

Cost of Financing

Risk Profile of Sector


FIGURE 15: PROJECT FINANCE3. Resourcing for growthWhilst the industry is largely enthusiasticover the 3-year horizon, market

conditions, though improving, have stillnot reached the levels of 6 or 8 yearsago, and companies remain somewhatcautious about prospects. Indeed, oursurvey shows that a number of companiesdo not expect a large jump in workloadgrowth in the near term, with the mainreason cited being caution over a rampup in resourcing that would be needed

should all projects go ahead as planned.Such caution is understandable in theconstruction sector that over the pastfew years has seen boom and bust cycles,and the industry will be seeking furtherevidence of a sustained commitment fromgovernments and the private sector beforecommitting to investment in resources.

4. Capacity and price increases

As the region’s industries transition to afirmer growth phase, there are a numberof operational and management issuesthat need to be dealt with. Supply chainconstraints, such as reduced capacity,are magnified in smaller marketswhere the availability of skills and keymaterials might be smaller or morelimited. Additionally, margins are expected

to remain squeezed in the near term,particularly as staff costs increase aftera remaining static for a number of years.The lag between immediate input costincreases and higher output prices untillater in the project cycle compounds themargin equation.



23

Country Statistics

B a h

r a i n

E g y p t

J o r d

a n

K u w

a i t

L e b a n o n

O m a n

Q a t a r

S a u

d i A r a b i a

U A E

Land Area, km2 (1) 0.8 995.5 88.8 17.8 10.2 309.5 11.6 2,149.7 83.6

Capital City Manama Cairo Amman Kuwait Beirut Muscat Doha Riyadh Abu Dhabi

Population, million (2) 1.2 84.2 6.5 3.9 4.5 3.2 2.0 30.0 9.0

Population growth, CAGR 2009-13 (%) (2) 3.1 2.3 2.3 2.8 1.3 2.5 5.5 3.0 2.4

GDP, US$, billion, current (2) 32.2 271.4 33.9 185.3 44.3 80.6 202.6 745.3 396.2

Real GDP growth, % (2) 4.7 2.1 3.3 0.8 1.0 5.1 6.1 3.8 4.8

Real GDP growth, 2014-19 pa forecast (2) 3.6 3.7 4.3 3.4 3.3 3.6 6.8 4.2 4.1

GDP/Capita (PPP), US$ (2) 34,584 6,579 6,115 39,706 14,845 29,813 98,814 31,245 30,122

Construction Output, Share in GDP (%) (4) 5.9 4.6 4.5 (5) 1.7 4 (5) 5.4 (5) 4.9 4.8 9.0

Value of Construction Output, US$, billion 1.9 12.1 1.5 3.0 1.7 4.4 9.9 35.9 36.2

Project awards, US$ billion (3) 0.75 N/A 2.9 11.6 1.4 8.5 25.6 78.4 68.6

Consumer Price Inflation, % 3.3 6.9 5.5 2.7 3.2 1.3 3.1 3.5 1.1

All data are 2013 data unless otherwise stated(1) Source: World Bank(2) Source: IMF

(3) Source: MEED, Budget value of construction contract awards(4) Value of Construction Output based on National Accounts(5) Estimate only

6.8%

4.3%

4.2%

4.1%

3.7%

3.6%

3.6%

3.4%

3.3%

0% 1% 2% 3% 4% 5% 6% 7% 8%

Qatar

Jordan

KSA

UAE

Egypt

Bahrain

Oman

Kuwait

Lebanon

GDP Annual %

Source: IMF, National Statistics

MENA ECONOMIC GROWTH FORECAST

2014-19 Forecast Annual Average2013

SHARE IN REGIONAL CONSTRUCTION MARKET

Based on 2013 Construction Output

34%

34%

11%

9%

4%3%

2% 2%1%

UAE

KSA

Egypt

Qatar

Oman

Kuwait

Bahrain

Lebanon

Jordan

The table and figures below provide a summary of key macroeconomic statistics.



24

ARTICLES

02



25

1. Theme ParksSuccess factors and

challengesIntroduction

Theme parks are back on the agenda inthe Middle East. Investors and operatorsare seeking to benefit from renewedmarket confidence and strong tourism

forecasts by adding to established retailand hospitality components. The trend ismost visible in Dubai where a number ofprojects that were previously planned arenow underway or in planning.

For example, Dubailand is seeing arevival of some theme park projectsthat were shelved during the downturn,

while IMG is in progress to deliver itsmulti-theme facilities that will featureMarvel superheroes and Cartoon Networkfavorites. Dubai’s Legoland theme park

is on track to be completed by 2016.In addition, Six Flags EntertainmentCorporation announced in spring 2014that it signed a deal with Meraas Leisure

and Entertainment to bring a Six Flagstheme park to Dubai, giving late 2017 asthe opening date. Six Flags Dubai wouldbe part of a Meraas-backed multi-parkdevelopment in Jebel Ali.

This article explores the theme parkindustry, looking at what makes themsuccessful and the possible reasons

for failure. Given the current pipelineof projects focusing on a successfulbusiness model is all the more important.

What is the Theme Park industry?

The Theme Park industry, as a clearlydefined segment, is relatively new. Manytheme parks historically were family

owned and single units that serviceda particular residential population.Today, group operators are emergingand the operation and design of themeparks is becoming increasingly moresophisticated.

A theme park can be defined as a gated,entertainment attraction with a range of

rides and shows that is based around atheme or number of themes. Within thisgroup, we categorize parks on the basis oftheir size and speak of:

— a local park with annual attendanceunder two million (for example FerrariWorld in Abu Dhabi),

— a regional park with annualattendance between two million andfive million (for example De Eftelingin The Netherlands),

— and, a destination park with annualattendance of more than fivemillion (such as Disneyland Park at

Disneyland Paris, France).



26

FIGURE 16: THE TOP 25 THEME / AMUSEMENT PARKS WORLDWIDE BY VISITORS

PARK AND LOCATION CHANGE 2013 2012

1 MAGIC KINGDOM at Walt Disney World, Lake Buena Vista, FL 6.0% 18,588,000 17,536,000

2 TOKYO DISNEYLAND, Tokyo, Japan 15.9% 17,214,000 14,847,000

3 DISNEYLAND, Anaheim, CA 1.5% 16,202,000 15,963,000

4 TOKYO DISNEY SEA, Tokyo, Japan 11.3% 14,084,000 12,656,000

5 EPCOT at Walt Disney World, Lake Buena Vista, FL 1.5% 11,229,000 11,063,000

6 DISNEYLAND PARK AT DISNEYLAND PARIS, Marne-La-Vallee, France -6.9% 10,430,000 11,200,000

7 DISNEY’S ANIMAL KINGDOM at Walt Disney World, Lake Buena Vista, FL 2.0% 10,198,000 9,998,000

8 DISNEY’S HOLLYWOOD STUDIOS at Walt Disney World, Lake Buena Vista, FL 2.0% 10,110,000 9,912,000

9 UNIVERSAL STUDIOS JAPAN, Osaka, Japan 4.1% 10,100,000 9,700,000

10 DISNEY’S CALIFORNIA ADVENTURE, Anaheim, CA 9.5% 8,514,000 7,775,000

11 ISLANDS OF ADVENTURE at Universal Orlando, FL 2.0% 8,141,000 7,981,000

12 OCEAN PARK, Hong Kong SAR 0.5% 7,475,000 7,436,000

13 HONG KONG DISNEYLAND, Hong Kong SAR 10.4% 7,400,000 6,700,000

14 LOTTE WORLD, Seoul, South Korea 15.9% 7,400,000 6,383,000

15 EVERLAND, Gyeonggi-Do, South Korea 6.6% 7,303,000 6,853,000

16 UNIVERSAL STUDIOS at Universal Orlando, FL 14.0% 7,062,000 6,195,000

17 UNIVERSAL STUDIOS HOLLYWOOD, Universal City, CA 4.0% 6,148,000 5,912,000

18 NAGAShIMA SPA LAND, Kuwana, Japan -0.2% 5,840,000 5,850,000

19 SEAWORLD, Orlando, FL -5.0% 5,090,000 5,358,000

20 EuROPA PARK, Rust, Germany 6.5% 4,900,000 4,600,000

21 WALT DISNEY STUDIOS PARK AT DISNEYLAND PARIS, Marne- La-Vallee, France -6.9% 4,470,000 4,800,000

22 SEAWORLD, San Diego, CA -3.0% 4,311,000 4,444,000

23 TIVOLI GARDENS, Copenhagen, Denmark 4.1% 4,200,000 4,033,000

24 DE EFTELING, Kaatsheuvel, Netherlands -1.2% 4,150,000 4,200,000

25 YOKOHAMA HAKKEIJIMA SEA PARADISE, Yokohama, Japan 2.4% 4,149,000 4,050,000

TOTAL 4.3% 214,708,299 205,906,000



27

How did it all start and where are we now?

Generally, the birth of ‘theme parks’ isattributed to Santa Claus Land in SantaClaus, Indiana – USA, which opened postWorld War II in 1946. This was the first

park to be designed with the intention ofpromoting a specific theme. DisneylandPark (California), originally Disneyland,opened on July 17 1955 and is widelyregarded as the park that made themeparks popular. Buzz Price, the founderof ERA which is now a part of AECOM,was commissioned to undertake thefirst feasibility study for Disneyland andestimated visitor numbers to reach 2.5

million visitors in the first year. In reality,Disneyland achieved 5 million gueststhat year. The park started with a pay-as-you-go scheme but changed this to a dayadmission scheme in the 1980s.

The 1960s saw the emergence of UniversalStudios, Six Flags and SeaWorld, all inthe USA. The 1970s were characterized

by globalization of the concept with theemergence of Sentosa Island (Singapore),Tokyo Disneyland and a number of Germanparks (amongst which Europa Park).In the 1980s theme parks were firmlyentrenching into the European market withthe opening of Alton Towers and ThorpePark in the UK amongst various others.The 1990s saw a bit of a dip in European

development as Disneyland Paris andPortaventura struggled. The 2000s havebeen dubbed the false dawn of China, asa number of openings were on the books

but took a very long time to realize. Now,in the 2010s we see strong Asian growthincluding in China, while in the MiddleEast there a number of theme parks in thepipeline.

In Europe, the Middle East and Africa(EMEA), AECOM tracks the performanceof just under 100 theme parks, most ofwhich are located in Europe (only one in

the Middle East). We estimate that thereare around 120 parks spread throughoutNorthern America, and Asia seems to topthe bill at over 140 parks.

Three of the five largest parks are locatedin Florida, two are in Japan and only onepark in the top 10 is based Europe.

In collaboration with the ThemedEntertainment Association, AECOMcompiles the Theme Index on an annualbasis, a document that tracks attendanceat theme parks, water parks andmuseums worldwide. The following tablesoutline the largest theme parks in themain geographic areas as published in the2013 Theme Index.



28

2.7 %

135.1m 131.5m

8 PARKS

FLORIDA, U.S.A.

1

2

4

6

3

5

7

8

9

10 12

13

14

1516

17

18

19

20

11

2 PARKS

OHIO, U.S.A.

1PARK

CANADA 2 PARKS

NORTH EAST U.S.A.

1 PARKVIRGINIA, U.S.A.

2013–12 top 20 theme/amusement parks North

America amusement growth

2013 top 20 theme/amusement parks North

America attendance

2012 top 20 theme/amusement parks North

America attendance

6 PARKS

CALIFORNIA, U.S.A.

8 PARKSFLORIDA, U.S.A.

VISITORS (MILLIONS)

Figure 5A

Up to 5 m

5 m–10 m

10 m–15 m

15 m+

FIGURE 17: TOP 20 THEME/AMUSEMENT PARKS NORTH AMERICA

Where are the top 20 theme/amusementparks in North America?


1 MAGIC KINGDOM at Walt Disney World, Lake Buena Vista, FL 6.0% 18,588,000 17,536,000

2 DISNEYLAND, Anaheim, CA 1.5% 16,202,000 15,963,000

3 EPCOT at Walt Disney World, Lake Buena Vista, FL 1.5% 11,229,000 11,063,000

4 DISNEY’S ANIMAL KINGDOM at Walt Disney World, Lake Buena Vista, FL 2.0% 10,198,000 9,998,000

5 DISNEY’S HOLLYWOOD STUDIOS at Walt Disney World, Lake Buena Vista, FL 2.0% 10,110,000 9,912,000

6 DISNEY’S California ADVENTURE, Anaheim, CA 9.5% 8,514,000 7,775,000

7 ISLANDS OF ADVENTURE at Universal Orlando, FL 2.0% 8,141,000 7,981,000

8 UNIVERSAL STUDIOS at Universal Orlando, FL 14.0% 7,062,000 6,195,000

9 UNIVERSAL STUDIOS HOLLYWOOD, Universal City, CA 4.0% 6,148,000 5,912,000

10 SEAWORLD FL, Orlando, FL -5.0% 5,090,000 5,358,000

11 SEAWORLD CA, San Diego, CA -3.0% 4,311,000 4,444,000

12 BUSCH GARDENS TAMPA BAY, Tampa, FL -6.0% 4,087,000 4,348,000

13 KNOTT’S BERRY FARM, Buena Park, CA 5.0% 3,683,000 3,508,000

14 CANADA’S WONDERLAND, Maple, Ontario -2.0% 3,582,000 3,655,000

15 CEDAR POINT, Sandusky, OH 5.0% 3,382,000 3,221,000

16 KINGS ISLAND, Kings Island, OH 0.0% 3,206,000 3,206,000

17 HERSHEYPARK, Hershey, PA 1.3% 3,180,000 3,140,000

18 SIX FLAGS MAGIC MOUNTAIN, Valencia, CA 3.5% 2,906,000 2,808,00019 SIX FLAGS GREAT ADVENTURE, Jackson, NJ 5.7% 2,800,000 2,650,000

20 BUSCH GARDENS WILLIAMSBURG Williamsburg, VA -4.5% 2,726,000 2,854,000

TOTAL 2.7% 135,145,000 131,555,000



29

VISITORS (MILLIONS)

Up to 5 m

5 m–10 m

10 m–15 m

15 m+

2

1 3

4

8

5

107

6 9

A

1 PARK GUATEMALA

1 PARK CHILE

1 PARK ARGENTINA

2 PARKSBRAZIL

2 PARKSCOLOMBIA

3 PARKSMEXICO


1 SIX FLAGS MEXICO, Mexico City, Mexico 1.5% 2,345,000 2,310,000

2 HOPI HARI, São Paulo, Brazil 3.5% 1,685,000 1,628,000

3 LA FERIA DE CHAPULTEPEC, Mexico City, Mexico 0.0% 1,537,000 1,537,000

4 BETO CARRERO WORLD, Santa Catarina, Brazil 2.0% 1,530,000 1,500,000

5 PLAZA DE SESAMO, Monterrey, Mexico 1.0% 1,209,000 1,197,000

6 PARQU E MUNDO AVENTURA, Bogota, Colombia 8.2% 1,152,000 1,065,000

7 FANTASIALANDIA, Santiago, Chile 1.5% 1,086,000 1,070,000

8 MUNDO PETAPA, Guatemala City, Guatemala -15.7% 1,056,000 1,253,0009 EL SALITRE MAGICO, Bogota, Colombia 10.0% 1,054,000 958,000

10 PARQU E DE LA COSTA, Tigre, Argentina -3.8% 1,050,000 1,091,000

TOTAL 3.8% 13,704,000 13,199,000

FIGURE 18: TOP 10 THEME/AMUSEMENT PARKS LATIN AMERICA

Where are the top 10 theme/amusementparks in Latin America?

2013–12 top 10 theme/

amusement parks Latin

America attendance growth

3.8%

2013 top 10 theme/


America attendance

13.7m

2012 top 10 theme/


America attendance

13.2m



30

1 2

3

4

5

6

7

8

9

111017

12

13

14

15

16

18

1920

4 PARKS

U.K.

5 PARKSFRANCE

1 PARK

SPAIN

2 PARKS

DENMARK

2 PARKS

SWEDEN

1 PARK

ITALY

3 PARKS

GERMANY

2 PARKS

THE NETHERLANDS

VISITORS (MILLIONS)

Up to 5 m

5 m–10 m

10 m–15 m

15 m+


1 DISNEYLAND PARK AT DISNEYLAND PARIS, Marne-La-Vallee, France -6.9% 10,430,000 11,200,000

2 EUROPA PARK, Rust, Germany 6.5% 4,900,000 4,600,000

3 WALT DISNEY STUDIOS PARK AT DISNEYLAND PARIS, Marne-La-Vallee, France -6.9% 4,470,000 4,800,000

4 TIVOLI GARDENS, Copenhagen, Denmark 4.1% 4,200,000 4,033,000

5 DE EFTELING, Kaatsheuvel, Netherlands -1.2% 4,150,000 4,200,000

6 PORTAVENTURA, Salou, Spain -4.0% 3,400,000 3,540,000

7 LISEBERG, Gothenburg, Sweden 2.1% 2,860,000 2,800,000

8 GARDALAND, Castelnuovo del Garda, Italy 0.0% 2,700,000 2,700,0009 ALTON TOWERS, Staffordshire, England 4.2% 2,500,000 2,400,000

10 LEGOLAND WINDSOR, Windsor, England 2.5% 2,050,000 2,000,000

11 THORPE PARK, Chertsey, England 11.1% 2,000,000 1,800,000

12 LEGOLAND BILLUND, Billund, Denmark 9.1% 1,800,000 1,650,000

13 PHANTASIALAND, Bruhl, Germany 0.0% 1,750,000 1,750,000

14 PUY DU FOU, Les Epesses, France 8.8% 1,740,000 1,600,000

15 PARC ASTERIX, Plailly, France -6.0% 1,620,000 1,723,000

16 GRONALUND, Stockholm, Sweden 6.6% 1,500,000 1,408,000

17 CHESSINGTON WORLD OF ADVENTURES, Chessington, U.K. 15.4% 1,500,000 1,300,000

18 FUTUROSCOPE, Jaunay-Clan, France -15.4% 1,464,000 1,730,00019 HEIDE PARK, Soltau, Germany 7.7% 1,400,000 1,300,000

20 DUINRELL/ATTRAKTIEPARK, Netherlands 1.1% 1,375,000 1,360,000

TOTAL -0.1% 57,809,000 57,894,000

FIGURE 19: TOP 20 THEME/AMUSEMENT PARKS EUROPE

Where are the top 20 theme/amusement parks in Europe?

2013–12 top 20 theme/

amusement parks Europe

attendance growth

-0.1% 2013 top 10 theme/


America attendance

57.8m 2012 top 20 theme/

amusement parks Europe

attendance

57.9m



31

What makes a theme park successful?

There are a number of factors that arecrucial to a theme park’s success.

1. Research: Upfront research provides

clear indications as to the relevantconcept and the demand withinthe marketplace. Ongoing researchpoints out ways of improving thepark, expanding the park andincreasing its market appeal.Research will provide the basis fordeveloping the right sized park forthe right sized market at the rightsized budget.

2. Site: For the development of a themepark a flat site is preferable. Thecapital costs of groundworks on asloping site or undulating site quicklybecome prohibitive and a flat siteallows for densely populating it withattractions without ‘losing’ too muchof the site in unbuildable areas.

3. Markets: The market for the park hasto be clearly defined and there hasto be plenty of it. Successful parksgenerally attract the majority of

their visitors from within a two-hourdrive time. Therefore, parks rely onproximity to (and access into) thesemarkets.

4. Products + Vision: IntellectualProperty (IP) providers areincreasingly important to thesuccess of a theme park. A wellknown brand will add to the

immediate appeal of the park andits target markets. Furthermore,the mix of the attractions withinthe theme park also have to be wellbalanced in terms of the market, thesub segments within that (such asdifferent age groups), and also witha view to managing queuing times atthe individual components.

5. Price: Successful pricing is basedon both local and internationalcomparables. Local pricing forentertainment will provide a viewto how much the market is used topaying for an ‘entertainment hour’,international pricing provides aninsight into the difference charged byvarious brands and destinations and

what premiums might be relevant.Pricing is furthermore of ongoingimportance as it is one of the mostimportant tools used in managingpeak times and seasonality.

6. Management: Experiencedmanagement is the engine of thetheme park industry, particular

where mature and competitivemarkets are squeezing profitmargins, strong management isessential.

FIGURE 20: THEME PARK SUCCESS FACTORS

Price

Site

Marketing

Product +Vision

Research

Management

Markets

Reinvestment

SuccessFactors



32

FIGURE 21: TICKET PRICING IN ASIAN PARKS

Spot versus Real (PPP) Ticket Prices, Asian Parks

Ticket prices

translated at spot exchange rates 95

Disney’s Magic Kingdom95

Ticket prices

translated at PPP exchange rates

92 Disneyland 92

85Busch Gardens Tampa

85

84 84Universal Studios Hollywood

81 Hong Kong Disneyland

79 79(450 HKD @ 5.53 HKD/USD)

Universal Studios Japan

Sea World San Diego

69 Universal Studios Singapore

(6000 JPY @ 97.4 JPY/USD) 68Six Flags Magic Mountain

68(74.9 SGD @ 1.07 SGD/USD)

Tokyo Disney Resort(6200 JPY @ 97.4 JPY/USD)

64Universal Studios Japan(6600 JPY @ 105.9 JPY/USD)

62Knott’s Berry Farm

62 Tokyo Disney ResortUniversal Studios Singapore

59 59(6200 JPY @ 105.9 JPY/USD)

(74 SGD @ 1.25 SGD/USD)

58 58 Ocean Park (Hong Kong)Hong Kong Disneyland

(450 HKD @ 7.76 HKD/USD)55

Cedar Point55

(320 HKD @ 5.53 HKD/USD)

48

Major Korean Theme Parks(44000 KRW @ 801 KRW/USD)

Ocean Park (Hong Kong)(320 HKD @ 5.53 HKD/USD)

41

Major Chinese Theme Parks(200 RMB @ 4.18 RMB/USD)

Major Korean Theme Parks(44000 KRW @ 801 KRW/USD)

40

Major Chinese Theme Parks(200 RMB @ 6.15 RMB/USD)

33Hersheypark

33

23 Siam Park City(400 THB @ 17.51 THB/USD)

Siam Park City(400 THB @ 30.65 THB/USD) 13

Source: Individual parks, IMF, Federal Reserve, Created by ProForma Advisors



33

7. Marketing: The theme park businessis extremely marketing sensitive,as the product competes withmany other forms of leisure andentertainment. In new markets, heavymarketing is required to establish

identity and to build awareness ofthe product, while in mature marketsthere is a strong need to constantlyinduce repeat visitation.

8. Reinvestment: Reinvestment iscrucial to theme parks. With themajority of visitors coming fromwithin a two hour drive time, themeparks need to offer something newregularly to ensure repeat visits

from the resident market. To do so,reinvestment in new rides and showsis key. From our research we knowthat investment in a new attraction(if well targeted) pays off directly inhigher attendance numbers.

What makes a theme park fail?

Location, location, location: As with otherhospitality and leisure markets, location isparamount for a successful park. Buildinga great park in the wrong location (too farfrom the market) is a sure way to gettinglower attendance than needed.

Overbuilding: One of the clear routes tofailure is overbuilding. There are a numberof examples, amongst which Terra Mitica

in Spain, where the ambitions of thepark when conceived were larger thanthe size of the market present. In thosecases, the park built was simply too big.Terra Mitica opened in 2000 and filed forbankruptcy repeatedly until it finally madean operational surplus in 2006. By this

point in time the size of the park had beenreduced, the value of the land effectivelywritten off and the market size had grown,catching up with the attractions offered.

Unclear branding: Another route tofailure is the lack of a clear message toconvey. There are a number of smallerparks that have failed over time due toa lack of a clear message to convey to

the market, a clear branding or imagethat is communicated. Today’s trend ofincreasingly important IP providers isone way of circumventing this danger asa well-known IP provider obviously hasa strong track record of providing a clearand concise message to the market.

But theme parks attract tourists don’t they?

Well, yes and no. When analyzing themepark visitation, the industry generallydistinguishes between resident visitorsand tourist visitors. Resident visitorsare divided into those residing withina 0 – 60 minutes drive time and withina 60 – 120 minutes drive time. Touristvisitors are divided between domestictourists and international tourists

and generally stay within a one hourdrive time. Large destination resorts

inclusive of a theme park componenttend to attract a larger proportion oftourist visitors and understandably so.These parks have a combined offer ofleisure and entertainment that extendsvisitors’ stay beyond a one day visit andthat largely drives their tourism visitornumbers. Smaller parks, without a largeenough entertainment offer and without

accommodation offer, logically have asmaller proportion.



34

The below table outlines the percentagedistribution of attendance amongstvarious market segments at a selectnumber of theme parks. Critically, it is onlythe large destination parks that achieve

a greater proportion of tourists thanresidents. For the vast majority of themeparks, visitors are generally residentsrather than tourists.

Park Attendance 2013

Resident Visitors Tourist Visitors

1-hr 2-hr DomesticTourists

InternationalTourists

Magic Kingdom 18,588,000 5% 75% 20%

Tokyo Disneyland 17,213,900 50% 25% 21% 4%

Disneyland Paris 10,430,000 15% 10% 18% 57%

Universal Studios Florida 7,062,000 5% 64% 31%

Europa Park 4,900,000 26% 46% 15% 13%

Port Aventura 3,400,000 18% 23% 25% 34%

Gardaland 2,700,000 20% 38% 29% 13%

Legoland Billund 1,800,000 20% 43% 0% 37%

Alton Towers 2,500,000 6% 37% 56% 1%

Source: AECOM

FIGURE 22: VISITOR MIX

Theme park maths – Revenue and Cost driversRevenue driversTheme parks usually have both thedirect revenue generating methods (i.e.admission) and the indirect revenuegenerating methods (i.e. F&B, retail stores,convention centers, etc). Theme parkrevenues tend to split and be analyzed infour broad categories as shown below.

FIGURE 23: REVENUE MIX

Revenue Mix (as a % of total revenue)

Admissions 48 - 60%

F&B 18 – 24%

Retail 12 - 24%

Other 4 – 8 %

Source: AECOM

Theme park admission prices are influencedmainly by attendance rates, which varyamong other factors according to thequality of the park, economic conditions,seasonality, marketing, competition orregulations. Theme park admission feestypically cover all the attractions in a parkand pricing is typically different based on

the duration of stay. The size and theme ofa park, the target segment and the numberof rides are potential reasons for differentprices. Customers pay extra for servicessuch as F&B, merchandise or specialtyrides/attractions.

Capital costsDeveloping a theme park is a complexbusiness, especially as each project wantsto stand out as unique and exclusive.The industry rule of thumb states thatdevelopers should expect to invest US$



35

100 - US$ 200 per expected first-yearguest to develop a theme park. Thus, if thegoal is to attract one million guests peryear, the total investment would need toequal US$ 100 to US$ 200 million.

Theme Park capital and operating costsdepend on the theme adopted for thepark and the kind of market it targets.Developing a globally-branded themepark, such as Universal or Disneyland,means that similar designs are appliedon all projects with the same brand,effectively cutting down the cost ofdeveloping each theme park designfrom scratch. This allows developers toconcentrate on adjusting the base designto local market specifics and the targetvisitors’ expectations.

The capital costs of developing a themepark can be divided into four components:

1. Land and infrastructure2. Structures3. Rides and shows (components with

highest visitor impact)4. Theming (such as land- and

streetscaping, facades, FF&E)

How theme parks utilize available spaceoptimally to ensure visitors’ positiveexperience is a key factor to long-termsuccess in continually attracting highnumbers of visitors. This includesdistribution of thematic attractions,efficient provision of services (i.e. F&B),and managing traffic and directional flowof visitors to avoid overcrowding. Globalbrands have the advantage of experiencein knowing what design draws in visitorsand the target audience will basicallyknow what to expect.

Infrastructure, utilities provision and

operational support facilities are thebase construction in the developmentof a theme park. This also includessuperstructures/foundations for theattractions from which themed buildingswill be erected. Everything else relatingto thematic attractions and branding aretypically specialist items, including rides,land and streetscaping, or facades. Thecosts for the thematic attractions willvary depending on their complexity. Forbranded theme parks, the “theme” andride systems, which are often one of thelargest sub-component costs, are usuallyreplicated on different developments.Consequently, this portion of capital costis largely a predetermined figure.

$36.3

$57.5

$100.8

$109.6

$139.3

$121.0

$212.4

$0 $50 $100 $150 $200 $250

1950s

1960s

1970s

Average

1980s

1990s

2000s

Average investment US$ per actual guest

Source: Kelly T. Kaak “Theme Park Development Costs:Initial Investment Cost Per First Year Attendee – A HistoricBenchmarking Study”

FIGURE 24: AVERAGE INVESTMENT PER FIRST-YEAR

GUEST BY DECADE (US$)



36

Operational costsExperience tells us that the largestoperating cost for a theme park tendsto be labor (anywhere between 35 and55 percent of total revenue), and profitmargins usually lie somewhere between

20 and 40 percent.

Assuming a hypothetical theme parkindeed operates on that basis and has afull adult admission price of around US$30, it becomes clear that it is pretty hardto make a theme park pay back its originalcapital expenditure over the short term.

For a developer theme parks may beinteresting from the perspective of addingto a wider resort destination, increasingthe occupancy and spend on site at theaccommodation product or at the retailcomponents that may form part of thewider development.

Full adult admission price $30.00

Admission yield of 65% $19.50 per capitaadmission

Gate = 60% of income $32.50 per capitatotal revenue

Profit Margin of 30% $9.75 per capitaprofit

Reinvestment at 10% ofrevenue

$3.25 per capitacost

Profit to fund development

cost

$6.50 per capita

Investment cost $100-200 per capita

Source: AECOM

For a local authority theme parks areone way in which they can activelyhelp broaden the tourist base for theirdestination, and we see occasionswhereby the local authority maydonate the land or even take a capital

participation in the development of thepark. It isn’t until a much later stage inthe development of a theme park, usuallywhen it has been sold a few times andwhen the destination as a whole hasgrown, that it becomes an interestingfinancial proposition for an investor.

As a theme park is an operating business,they are generally evaluated as a multipleof its earnings. The below table outlinessome of the values achieved and multiplesinvolved in the attraction industry.

As shown, apart from some good years atthe height of the economic cycle over thepast 10 years or so, earnings multiplesare not great, reflecting the low cash-flowcompared to outlay of capital cost.

FIGURE 25: HYPOTHETICAL BUSINESS MODEL

P a r k /

B u s i n e s s

Y e a r

V a l u e

( m i l l i o n )

E B I T D A

( m i l l i o n )

M u l t i p l e

Six FlagsEurope

2004 €155.0 €25.4 6.1 x

MerlinEntertainments

2005 £102.5 £10.6 9.7 x

Tussauds Group 2005 £800.0 £70.2 11.4 x

Star Parks 2006 €240.0 €22.9 10.5 x

SydneyAttractions Gp

2010 A$115.0 A$19.8 5.8x

Movie ParkGermany

2010 €50.0 €7.3 6.8x

7 CdA sites 2011 €29.0 €4.9 5.9x

PortAventura(50% stake)

2012 €439 €59 7.4 x

PortAventura(50% stake)

2013 €439 €68.8 6.4 x

Source: AECOM

FIGURE 26: THEME PARK PROFITABILITY



37

So what about the Middle East?

How these numbers will stack up in theMiddle East remains to be seen as theregion kicks the development of themeparks up a gear.

The UAE’s theme park sector is certainlygetting both government and privatesector support. A number of factorsremain to be seen that will determinethe eventual success and sustainabilityof this industry. Can a number of themeparks all survive in the same country?What is driving the demand? Comparedwith other markets, the local population

size is limited, but on the upside the localpopulation is young and growing and manyresidents have a much larger disposableincome than in other regions. Foreigntourists are likely the bigger potentialclient base and Dubai alone is targetingannual visitors of 20 million by 2020.

AECOM’s theme park experts suggestthat the future is in integrated projects,combining theme parks with on-sitehotels, conference facilities and corporate

business. Development also has to takeinto account consumer preferencesand innovate on traditional theme parkconcepts with an eye toward the localmarket and culture.

There are numerous theme parkprojects in the pipeline, with somegreat IP providers, so it will not be longbefore AECOM will be able to produce a

separate set of results for Theme Parksin the Middle East. Until then we areeagerly monitoring the development ofwater parks in the region and of FamilyEntertainment Centers, both greatindicators and complimentary to themepark development. Watch this space!



38

Despite geopolitical instability inthe region over the past few years,confidence in pockets of the MENAhospitality industry is strong and majoroperators are expanding their portfoliossignificantly to take advantage of firmmarket dynamics.

According to the STR, the Middle East/Africa hotel development pipelinecomprised 581 hotels totaling 137,800rooms in April 2014, of which 16,762rooms are being delivered in the UAE.MEED estimates that there are currently325 hospitality projects in the GCC dueto be completed between 2014 and 2018,

adding significant supply to the market(FIGURE 27).

0

10

20

30

40

50

60

70

80

90

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014f 2015f 2016f 2017f 2018f

N u m b e r

Source: MEED Projects as of August 2014

UAE Saudi Arabia Qatar Oman Kuwait Bahrain

FIGURE 27: MIDDLE EAST HOSPITALITY PROJECT COMPLETIONS SINCE 2005

2. Hotel RefurbishmentOptimizing the value of hotels

— The case for refurbishmentDubai, probably the most maturehospitality market in the region, has asubstantial supply pipeline. On the backof the government’s tourism growthstrategy and visitors expected for theExpo 2020, hotel developers have beenconfident in announcing additionalhotel offerings. According to the DubaiDepartment for Tourism & CommerceMarketing and industry sources (suchas Jones Lang LaSalle and PKF), thereare currently 99 hotels and 48 hotelapartments in the 2014-16 developmentpipeline, which would bring the total by2016 to 752 hotels and increase the totalnumber of rooms by over a third (FIGURE

28).



39

With so many new hotels being deliveredto the market, existing propertiesare under pressure to maintain theirposition. This often means that they haveto refurbish, modernize or reflect on

branding. Keeping up with competitionwith newly-opened and planneddevelopments in the run up to 2020 couldbe a major challenge facing establishedhotels in Dubai.

Consequently, Dubai has seen a numberof the leading hotels undergoingrefurbishment, while others are likely toaccelerate refurbishment programs andembark on major renovations in the run

up to Expo 2020.

This article examines the businessdrivers for hotel refurbishments,including key cost drivers, challenges andmeasuring success.

2013

No. of Properties 611

No of Rooms 84,534

2016 Forecast based on

current pipelineNo. of Properties 752

No of Rooms 114,000

0

5

10

15

20

25

30

35

40

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014f 2015f 2016f 2017f

N u m b e r

Source: MEED Projects as of August 2014, DTCM

Completions Starts

FIGURE 28: DUBAI HOSPITALITY PROJECT STARTS AND COMPLETIONS SINCE 2005

Why refurbish?

There are numerous business justifications for hotel refurbishments,mostly centered on strategic, operational,functional and legislative demands(FIGURE 29). Ultimately, the investmentshave the common objectives ofmaintaining market position, improvingoperational efficiency for operators andsecuring the owner’s return by increasing

the capital value of the property.

Competitive pressures and the need tocontinuously meet customer expectationscreate perhaps the biggest need for hotels’capital expenditure. New standards,with regards to both design and service-levels are constantly being set aimed atkeeping ahead of the competition. Designin particular is a key differentiator, andextremely high-quality bathrooms, high-

performance air-conditioning, extensivein-room entertainment, IT facilities andenhanced safety in line with internationalstandards are all important for hotels toremain competitive.

currrent pipeline



40

FIGURE 29: DRIVERS FOR HOTEL REFURBISHMENTS

How often to refurbish?

The hotel refurbishment cycle needs to beconsidered within the context of the wider

hotel asset management cycle, whichinvolves the process from acquisitionto ownership and finally to disposal.In the best scenario, hotels shouldundertake long-term strategic planning ofrefurbishment cycles as part of the hotel’sProperty Planning & Development andHotel Improvement Planning (HIP).

Key components and cost driversHotel refurbishment projects are typicallybudget driven and achieving the rightbalance between the client’s vision,budget and time constraints is the maintask of the project team. The timing ofcapital works is vital given that manyhotels continue trading while beingrefurbished/renovated.

Typically, hotel refurbishment canbe divided into two broad categoriesdepending on the extent of the work -

renovation (soft/full) and remodeling/rebranding.

— Renovation: Renovation is commonlyrequired every five to seven yearsand involves adding new elementsto the rooms to ensure that the hotelremains competitive in its target

market. Renovation can involve softrenovations and full renovations.

How often hotel refurbishments shouldoccur depends largely on the age of theproperty, standard of construction, thecurrent fit-out, level of maintenanceand the competitive environment thehotel operates in. Typically hotels work

on seven-year refurbishment cycles,assets that have well-designed, high qual-ity fit-out and rolling maintenance pro-grams may have longer cycles. However,competition, client demand and techno-logical advances mean that the time be-tween major refurbishment cycles ap-pears to be shortening.

Hotels are unique in that they are realestate assets for owners and operatingbusinesses for operators. Investmentobjectives can vary between owners andoperators. Capital expenditure from anoperator’s perspective may be aimedat achieving immediate commercialtargets that may not always be alignedwith the long-term strategic interest ofasset owners. Aligning the objectives of

short-term operational business needsto long-term goals is increasingly dealtwith by asset managers whose mandateit is to assist with the management of ahotel over its life-cycle and to maximize itsvalue. This includes operational oversight,managing capital expenditure budgetsand refurbishment cycles. (FIGURE 30)



41

FIGURE 30: HOTEL ASSET MANAGEMENT CYCLE + HOTEL LIFE-CYCLE

Source: HVS, JLL, Colliers International, AECOM

Development and Acquisition

Opportunity identification

Business plan

Site selection

Due diligence

Market & Feasibility assessment

Transaction or development

Management contractnegotiation

Hotel Investment lifecycle

managementOperational monitoring andbenchmarking

Capex planning

Repositioning analysis

Valuation

Asset Disposal Plan

Transaction execution

Operational Phase Disposal

Asset Mangement Cycle



42

Source: JN+A Hotel Cost Estimating Guide 2014, AECOM

Indicative only. Breakdown and costs depend on project and location

0%

20%

40%

60%

80%

100%

Total Soft Renovation

% o

f T o t a l

Total Full Renovation

Other Common Additives

Infrastructure

Recreation Facilities

Function Spaces

F+B

Public Spaces

Guestrooms and Bathrooms,Guestroom Corridors

Based on luxury hotel with 200 guestrooms, 20 suites, 6 storiesTotal average capex (US$) soft renovation 8.92 million, full renovation 21.29 million

Assumptions:

Guestrooms: 220 keys

Public spaces: based on 5,920 sq ft

F+B: based on 8,600 sq ft

Function spaces: based on 10,216 sq ftRecreation facilities: based on 13,736 sq ft

Infrastructure based on 352 parking spaces and landscaping allowance

Other common additives: includes Elevators, Electronic Signage Boards, Laundry Equipment,

Guestroom ADA Modifications

FIGURE 31: CAPITAL COST BREAKDOWN LUXURY HOTEL

— Remodeling or Rebranding:Rebranding or remodeling aims tomove the hotel into a different sectorand increase room rates. This caninvolve creating new guest roomsusing redundant space, replacing

services and bathrooms, changingroom and area layouts or introducingnew guest facilities, such as IT andin-room entertainment, and completereplacement of finishes, furniture,fittings and equipment.

(FIGURE 31) and 32 illustrate typical costbreakdowns for hotel refurbishmentprojects. This breakdown identifies broadareas of costs that apply to most hotelrefurbishment projects. However, the costsshown are indicative only and project-specific conditions, including location willaffect the final cost and cost breakdown.

On top of the cost items shown, projectexpenditure will include Operating Suppliesand Equipment (OS&E), professional fees,contingencies, etc.

Guest rooms — the main revenue

generator — are usually the main focus ofany refurbishment. Investment can focuson the creation of new rooms or alterationof existing rooms, improving bathroomsto keep up with contemporary designthemes, IT and entertainment systems,etc. Investment in other operationalareas will be prioritized according toavailable budgets. Areas include front-of-house, such as bars and restaurants,conference facilities, back-of-house area,or improvements to layout, circulation andfacilities to improve staff productivity andworking conditions.



43

Source: JN+A Hotel Cost Estimating Guide 2014, AECOM

Indicative only. Breakdown and costs depend on project and location

0%

20%

40%

60%

80%

100%

Total Soft Renovation Total Full Renovation

Other Common Additives

Infrastructure

Recreation Facilities

Function Spaces

F+B

Public Spaces

Guestrooms and Bathrooms,Guestroom Corridors

Assumptions:

Guestrooms: 304 keys

Public spaces: based on 4,940sq ft

F+B: based on 8,100 sq ft

Function spaces: based on 23,178 sq ft

Recreation facilities: based on 4,508 sq ft

Infrastructure based on parking and landscaping allowance

Other common additives: includes Elevators, Electronic Signage Boards, Laundry Equipment,

Guestroom ADA Modifications

% o

f T o t a l

FIGURE 32: CAPITAL COST BREAKDOWN UPSCALE HOTEL

Challenges

There are many uncertainties impactingon major refurbishment projects. Havinga HIP can help build a long-term strategyfor the asset’s property development andrefurbishment cycle, which will help theasset owner to mitigate uncertainties

over the assets life-cycle. Key risks torefurbishment projects include the asset’sbuilding fabric condition, structure andfloor plans, or MEP provisions. Maintainingoperations during refurbishment works isa key aspect that has to be considered onmajor projects.

Building condition

The condition of a building can be oneof the major unknowns associated withhotel refurbishment projects. The ageof an asset and whether it has been

expanded or converted from other uses,will play a major factor. Carrying outcondition surveys and measured surveysof the building fabric can assist in theearly allocation of budgets for repair andalteration works and will reduce the risk of

uncovering unexpected difficulties duringconstruction.

Structure and floor plansThe influence of existing structureson new room layouts and servicesdistribution routes is another area ofpotential risk. For example, restrictions onfloor loadings, floor-to-ceiling heights, the

construction of openings or arrangementof windows can limit the envisaged designof rooms and function spaces.

Hotel refurbishment capex breakdown based on upscale hotel with 304 guestrooms, 9 stories.Total average capex (US$) soft renovation 5.04 million, full renovation 13.25 million.

Total average capex (US$ )



44

Plant rooms and services distributionRefurbishment schemes often involvealteration of services. The size andlocation of existing plant rooms, togetherwith the limited availability of extra spaceto accommodate new equipment, can be a

constraint on the options available to theclient. In addition, the size and location ofexisting risers and horizontal distributionroutes can be a source of particulardifficulty as new services are planned.Installation costs increase and schedulesare extended when services need to bethreaded through the structure of anexisting building.

Maintaining operations duringrefurbishment worksThere is a fine balancing act betweencontinuing to operate duringrefurbishment and risks in order tominimize loss of revenue and maintaincontinuity.

Refurbishment on hotels that continue to

maintain operations during construction

usually take place in a small numberof discrete phases, such as with wholefloors being taken out of commissionto minimize disruption. This has to bebalanced with higher costs of associatedwith working in phases, which arise from

high-quality hoardings, isolation, diversionand resupply of building services, andother temporary works between phases.Consequently minimizing disruptionshas to be balanced with maintainingcontinuity of the refurbishment works.

Managing disruptive activities,coordinating service shut-downsand providing safe access for guests,operatives and materials are amongthe many challenges associatedwith maintaining operations duringconstruction work. Consequently,achieving certainty of completion, zerodefects and compliance with statutoryrequirements to permit immediateoccupancy of guest rooms onceconstruction is completed is key to

maintain operational efficiency.

What is a successful refurbishment?

A successful refurbishment meansa successful hotel, which is judgeddifferently by stakeholders. To guests,a successful hotel means a positiveexperience, including value for money,convenience, style and great service. Forthe hotel operator it is satisfied repeatcustomers, operational excellence andimproved financial performance. For theowners it means an asset of high value foryears to come.

The success of a refurbishment projectcan be measured quantitatively, viafinancial KPIs, as well as qualitatively, via

customer satisfaction.

FIGURE 33: HOTEL PERFORMANCE INDICATORS

Performance Area Example Indicators

Value Creation Market value of Asset

Efficiency andoperational

performance

OccupancyCost per Occupied Room

Average Rate Index

Financial performanceand profitability

ADR, RevPAR, TrevPAR

Market Share Market Penetration IndexRevenue Generation Index

Qualitative Measures Property Condition,Customer Satisfaction

Some considerations for delivering

successful refurbishment projects areplanning and risk management, supplychain management and future proofing.



45

Critical to the success of anyrefurbishment, in particular thoseundertaken while maintaining operations,is ensuring robust planning in orderto minimize disruption to guests andoperations, delivering rooms as each

phase is completed to minimize loss ofrevenue, and to meet the program budgetand schedule. Health and safety is a majorconsideration as the interface between acontractor and hotel guests and workingstaff is close.

Hotel refurbishments usually run on tight,short schedules, meaning that supply-chains have to be managed carefully.Early procurement, through either clientdirect orders or early appointment ofcontractors, is a common solution.Commitment of requirements early onis important to ensure the materials canbe sourced, as any delays will affect theschedule. Logistics are also important inensuring separate access for guests andmaterials.

A successful hotel refurbishment projectis dependent on the right project team,from owner and operator, consultants,designers and contractors.

At the outset, aligning owner andoperator objectives is key. A well plannedand executed HIP that encompassesthe elements of capital expenditureplans over the life-cycle of a hotel canhelp long-term planning in terms of

investment needs, timing, budgetsand cash flows. Consultants anddesigners need to understand clientobjectives and expectations to deliverrefurbishment solutions that can achievethe requirements within a tight budget. Inturn, contractors need to understand howhotels operate, have access to a specialistsupply chain and the ability to deliver workon phased projects in operating buildings.



46

Of all the factors necessary to achieveexpected growth, efficient riskmanagement ranks high on the agendaof the industry. Yet, as our 2014 industrysurvey shows, the Middle East constructionindustry still has some way to go before itcan have real confidence in its ability tomanage risk. Indeed, delivering large-scaleprograms on time and on budget remains amajor challenge. 78 percent of respondentsto our survey report underperforming

projects, due primarily to changes inproject scope, delays and unrealistictimeframes, and unclear project objectivesand business case (FIGURE 34). In turn,clients are faced with the challenge ofproject teams not delivering projects withinbudgets and schedule. Quality of workhas also been cited by clients as a majorconcern, which has partly been explainedby poor project management in some partsof the industry.

FIGURE 34: PROJECT PERFORMANCE

0 20% 40% 60% 80%

Project scope change

Unrealistic time frames

Unclear project objective + business case

Unrealistic budgets/ funds

Poor stakeholder engagement

Poor organizational support + decision making

Poor consultant/ contractor performance

Technical design issues

Lack of resources

Poor communication + IM in project team

Poor management + coordination of project…

Handover and facilities management issues

Poor commercial management

Poor choice of procurement method


CAUSES FOR UNDERPERFORMING PROJECTS IN THE MIDDLE EAST

% of Respondents

Delivered to Budget

Delivered on Time

0% 25% 50% 75%

PERCENTAGE OF MIDDLE EAST PROJECTS DELIVERED ON TIME AND ON BUDGET

Respondents opinion on percentage of projects delivered on time and on budget

43% of respondents believeonly 25% of projects in theMiddle East are delivered tobudget and only 9% believe75% of projects are deliveredon time

78% of surveyrespondents

currently haveunder-performing

projects.

3. Risk ManagementDecision making in an uncertainenvironment



47

Source: Flyvbjerg et al. 2003, How common and how large are cost overruns in transport infrastructure projects?

0%

10%

20%

30%

40%

-80% -40% 0% 40% 80% 120% 160% 200% 240% 280%

F r e q u e n c y

Planned vs actual costs

This finding in itself is not new. Fordecades studies have demonstrated thedegree of uncertainly around time andcost in project delivery (FIGURE 35). Thereal question is why this trend continuesin our industry. The potential for such

incidents could be decreased significantlyby better risk management, and according

to the industry players the sector needs toconsider why it has not achieved the riskmitigation levels of other industries, andfind solutions to achieve better results.The industry player that successfully findsthe solution to this fundamental question

will have a strong competitive advantage.

FIGURE 35: RISK VERSUS PERFORMANCE

The 2003 paper published by Flyvberg et al. is an example of the analysis of project performance. The study analyzed circa

260 infrastructure projects in 20 countries. The diagram above from the report demonstrates the wide, positively skeweddistribution in performance

Framework for Assessing Successful Risk Management

To improve risk management on projectsand programs, we advocate the adoptionof a scorecard (maturity) framework tounderstand what factors are working well

and what areas need further attention(FIGURE 36). This involves a review and

evaluation of key performance indicatorsrelated to successful risk managementthat allows us to focus on the keyactions required to continuously improve

performance.



48

Sponsorship

O wn er sh i p

Decision Input

K P I s

Governance

Execution

P r o g r a m

Framework

P o l

i c y

Procedures

T e m

p l a t e s

Assessment

Mi t i g a t i on

Execution Planning

C o o r d i n a t i o n

Allocation C omm onR i

sk s

Planning & Strategy

D a t a

R i sk C u l t ur e

Factors Scorecard Overall Scorecard

• Framework• Policy

• Procedure• Templates

• SeniorManagementSponsorship

• Risk Ownership• Decision Making

Input• Risk KPIs

• Risk Modelling

• Effective RiskMitigation

• RealisticExecutionplanning

• Cross teamcoordination

• ResourceAllocation

• Management ofCommon Risks

• Integration withplanning and

strategy• Data Management

Risk

Governance

Risk Culture

Execution

ProgramImprovement

2 0 1 3

2 0 1 4

FIGURE 36: RISK MANAGEMENT IMPLEMENTATION FRAMEWORK

Some of the general findings from the useof our framework are as follows:

— Most industry players in the regionhave a conceptual understanding

of the risk management framework,process and basic tools, andacknowledge its importance forsuccessful delivery. Generally theindustry is still heavily focused on therisk identification step of the process.An increase in performance is seenwhen time is more appropriatelydedicated to the analysis of theunderlying cause of the risks and

the actions, investments andaccountability required to mitigatethe risks.

— An increase in performance isseen when risk management isimplemented as an integral part ofthe planning and decision makingprocess as opposed to a process that

follows after the plan is developedand decisions are made. In thetraditional approach targets are set,plans are developed and decisionsare made following which risks areidentified to a plan that is already inmotion. Performance improvementis seen when risk analysis is used asa tool to help develop the plan, settargets and make decisions from the

start.



49

— An increase in performance is seenwhen senior managers buy into andcontinuously show their sponsorshipof risk management. This can bedemonstrated by communicating howthe risk analysis conducted informs

their decision making process.This can help build a culture of riskmanagement that acknowledges riskas an inherent part of projects andthe management of risk as an integralpart of the ‘way we work’ as opposedto one of compliance.

— Optimism bias relating to settingproject targets, assumptions andforecasts is a common phenomenon.

— Capital cost is modeled basedon forecasts for average UAEconstruction benchmark cost

for a four star hotel, 10 percentprofessional fees and a percentageallocation for other costs related tothe development.

The financial model using thedeterministic inputs for income and costprovides a project Internal Rate of Return(IRR) of 13 percent for the owner.

A potential investor requires further insightto the risk surrounding income forecasts.A Monte Carlo analysis is conducted byassigning a probability profile for theincome variable under two scenarios(FIGURE 37). In scenario one, the developerhas a relatively high degree of confidencewith regards to the income forecast andassumptions applied. Under scenario two

the developer believes there is a greaterdegree of uncertainty about the forecasts.By running multiple simulations for bothscenarios, a probability distribution

The inherent uncertainties aroundthese factors can be betterunderstood and accepted by decisionmakers, specifically at the initialplanning phase of the project viahigh level risk modeling. For example,

probabilistic models and analysiscan help demonstrate the degreeof uncertainty inherent in suchassumptions and the degree ofconfidence in achieving targets.

A theoretical exercise can helpdemonstrate the principles ofrisk modeling and its value indemonstrating the degree ofuncertainty inherent in a project.

Hypothetical Hotel Development — Financial Risk Modeling

A high level financial model is required toanalyze a possible a hotel development.The development is to be a four star

hotel, of approximately 300 keys, to beoperational in approximately three to fouryears.

The financial model is developed applyinga discounted cash flow approach, usinghigh level forecasts for income and costdrivers.

— Income for the asset owner ismodeled based on annual netoperating income (ANOI) under amanagement contract.ANOI is calculated based on totalrevenue forecasts (RevPAR, F&Betc.), total expenses (departmentaland undistributed expenses) andmanagement fees. All operatingexpenses are assumed to be borne

by the hotel operator and as suchno provision is made for operatingexpenses for the hotel owner.



50

Source: AECOM

0.5

0%

20%

40%

60%

80%

100%

0 5 10 15 20 25

P r o b a b i l i t y D e n s i t y a n d C

u m u l a t i v e P r o b a b i l i t y

Internal Rate of Return %

Probability Distribution

Scenario One

is generated to show the likelihood ofachieving a specified project return. Thisis one way to demonstrate to decisionmakers and stakeholders the degree of

risk inherent in project variables (such asincome) and achieving the target projectreturn. Furthermore, this tool can be usedto develop mitigation actions.

Probabilityof change inIncome (%)

Assumedchange in

Income

5.0% -7.5%

10.0% -5.0% 20.0% -2.5%

30.0% 0.0%

20.0% 2.5%

10.0% 5.0%

5.0% 7.5%

Source: AECOM

Scenario Two

0.5

0%

20%

40%

60%

80%

100%

0 5 10 15 20 25

P r o b a b i l i t y D e n s i t y a n d C u m u l a t i v e P r o b a b i l i t y

Internal Rate of Return %

Probability Distribution

Probabilityof change inIncome(%)

Assumedchange in

Income

5.0% -22.5%

10.0% -15.0% 20.0% -7.5%

30.0% 0.0%

20.0% 7.5%

10.0% 15.0%

5.0% 22.5%

FIGURE 37: MONTE CARLO ANALYSIS OF INCOME AND IRR

Under scenario two the greater uncertainly is reflected in a wider distribution ranging from an IRR of8% IRR to 18% and lower confidence in achieving the target IRR

There is a high degree of confidence in achieving the IRR targets under scenario one with a narrowdistribution ranging from 11% to 14% IRR



51

REFERENCE

ARTICLES

03



52

All clients expect buildings to be ontime and budget with an agreed level ofquality, with the risk rightly managed bytheir professional and contracting team.However, most clients and constructionprofessionals can name at least oneproject that was not delivered to budget,time or the quality levels expected. This iswhy the right procurement strategy, one

that balances risk and control against thecompeting project objectives of cost, timeand quality, is key to a successful projectoutcome.

AECOM has developed strategies forthe delivery of buildings that we knowwork, successfully delivering hundredsof projects over our long history. Newand existing developers have theopportunity to learn from this knowledge

and maximise the value from their time,cost and quality mix, whilst adhering to aprocess that increases the likelihood oftheir building being successfully procuredby their team involved.

Studies conducted with our key clients whoregularly undertake development work,have shown that buildings can be delivered

for 12-15 per cent less cost when procuredcorrectly with no impact on quality or time.Buildings are more likely to be on time andmeet clients’ expectations when procuredcorrectly. So what is the right procurementapproach for your building? Which fundingstrategy, funding partner, team behaviours,attitudes, communication channels, budgetand programme delivers the best approachand how can we best combine these to leadour clients to ultimate success?

AECOM Project Management

AECOM offers important early advice tohelp determine the right procurementapproach, adding value throughoutthe building process. This consideredunderstanding of our clients’ time, cost

and quality requirements maximisesthe value we can offer. Some of theprocurement strategies followed in theindustry are listed below, but the realchallenge is mixing the right approach foran individual client’s needs:

— Traditional Lump Sum: The design bythe client’s consultants is completedbefore contractors tender for andthen carry out the construction. Thecontractor commits to a lump sumprice and a completion date prior to

appointment. The contractor assumesresponsibility for the financial andprogramme risks for the carrying outof the building works, whilst the clienttakes responsibility and accepts

the risk for the quality of the designand the design team’s performance.The client’s consultant administersthe contract and advises on aspectsassociated with design, progress andstage payments which must be paidby the client.

1. PROCUREMENTROUTES



53

— Accelerated Traditional: As above,but procured in the market placebefore being fully designed (normally80-85 percent designed), leavingmore simple elements of the buildingto be procured once the contractorhas been appointed. It is important

to understand the way in whicha client procures the remainingelements of work with a contractorunder this approach and to designout those areas that carry inherentrisk early in the process. It may alsoinvolve the procurement of an earlyworks package for enabling and/orpiling works.

— Two Stage: A contractor is invitedto become part of the project teamin stage 1, usually by way of apreconstruction fee. They design andprocure the project on behalf of theclient, until such time that a secondstage lump sum offer can be agreed,which should be before constructionbegins on site. An understanding of

the original appointment and thesubsequent framework under whichthe second stage is agreed, are theimportant aspects of this approach,as well as working with transparency

and trust preventing an earlycommitment to a full scheme that aclient cannot afford.

— Design and Build: Detaileddesign and construction are bothundertaken by a single contractor

in return for a lump sum price.There are variants on this optiondepending on the degree to whichinitial design is included in theclient’s requirements. Where aconcept design is prepared by adesign team employed directly bythe client before the contractor isappointed (as is normally the case),the strategy is called develop andconstruct. The contractor commitsto a lump sum price, for completionof the design and the constructionand to a completion date, prior tohis appointment. The contractor caneither use the client’s design teamto complete the design or use hisown team. With design and build itis important to design out or specify

in detail those parts of the buildingthe client wants to see performa particular function or provide aparticular visual impact.



54

— Management Contract: Design bythe client’s consultants generallyoverlaps with the construction.A management contractor isappointed early to tender and letelements of work progressively to

subcontractors and specialists inwork packages. The contracts arebetween the management contractorand the trade contractors, ratherthan between the client and sub-contractors. The managementcontractor will not carry outconstruction work, but is employedto manage the process. Themanagement contractor in theoryassumes responsibility for thefinancial (and programme) risksfor the works, but in reality this isnormally diluted by the terms of thecontract so his liability is similar tothat of a construction manager.

— Design, Manage and Construct:similar to the management contract,

with the contractor also beingresponsible for the production of thedetailed design or for managing thedetailed design process.

— ‘Turnkey’ contract: A form of adesign and build contract, in whicha single contractor or developer isresponsible for all services, includingfinance. Under a turnkey project, theclient enters into a contract with oneparty to deliver the entire project.The project is handed over once itis completed and fully operational.The client is normally not involved in

any of the decisions throughout thebuilding process. There are severalvariations of ‘turnkey’ contracts,including Engineer-Procure-Construct (EPC), Build-Own-Lease-Transfer (BOLR), Design-Build-

Operate-Transfer (DBOT), or PFI.

— Private Finance: A detailed andcomplicated form of procurementused predominantly for publicservices when the private sectorfeels it is advantageous to design,build, finance and operate aparticular service or building type.It is becoming more popular in theMiddle East as a way to limit publicsector spending whilst meeting thedemands of a growing population.

— Engineer, Procure and Construct(EPC): EPC is a form of “turnkey”contract. This form of procurementplaces risk in the right handsand offers solutions to clients’

engineering requirements from thosespecialised to meet the performancerequirements set by a client team.Many of the large utility companiesprocure work in this way, bringinghigh levels of certainty from thesupply chain which helps to achievebusiness critical benefits over thelong-term.



55

2. MIDDLE EAST FORMSOF CONTRACT

This article considers the different formsof contract used in construction acrossthe region.

Bahrain

Qatar

Lebanon

KINGDOM OFSAUDI ARABIA

Yemen

Oman

UAE

Iraq

Egypt

Syria

Jordan

Iran

Kuwait



56

Bahrain

BahrainGovernment work in the Bahrain is undertaken usinga bespoke suite of contract forms that were issued in2009.

Private developers predominantly use the currentFIDIC Conditions of Contract for Construction, the1999 edition of the ‘red book’, which is well understoodin the local market but often heavily amended forspecific use. Most of the work completed in Bahrain isunder a traditional lump sum form of contract, where thedesign is completed upfront and a price agreed with a

contractor before work begins on site. However, many ofthe new developments are looking at faster procurementroutes to adapt to market difficulties that are prevalentwithin the Middle East. Progress is slow as Bahrain hasa limited number of contractors with the capacity andcapability to undertake large scale projects. Historicallyit has been difficult for new contractors to enter theBahrain market.

Design and build and two-stage procurement are inuse across the Kingdom but are not considered tobe the industry norm. As more international private

developers have started working in Bahrain withtime constraints as their main driver, the markethas adjusted to accommodate this demand. Designand build contracts, however, are not routine. Thisis largely due to the Committee for OrganisingEngineering Professional Practice (COEPP) restrictionson contractors undertaking in-house design thatnecessitates the novation of the client’s architect or asub consultant appointment.

Kingdom ofSaudi Arabia

Kingdom of Saudi ArabiaConstruction contracts in the private sector aregenerally based on FIDIC forms of contract andare amended to suit the particular conditions foreach project. Employers prefer lump sum versusremeasured contracts and normally exercise greatcontrol in the administration of the constructionprocess by imposing various restrictions on theengineer’s (consultant) authorities under the contract.All contracts are subject to Saudi laws where IslamicSharia is the prime source of legislation. Litigation andarbitration are both available for resolution of disputes

in the private sector.

Within the public sector, however, constructioncontracts are based on the Standard Conditions forPublic Works, which are amended to suit particularprojects. These conditions are generally based onthose 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 tothe employer for the administration of the contract.All public work contracts are let on remeasured basisand subject to the Saudi Government Tendering and

Procurement Regulations, as issued by Royal DecreeM/58 dated 4.7.1427 AH. Disputes are referred to theGrievance Board and will not be dealt with underarbitration, unless a Special Council of MinistersResolution is issued.



57

Lebanon

LebanonConstruction contracts in Lebanon are generallybased upon the FIDIC forms of contract. Some largescale developers in Lebanon, as well as the Lebanesegovernment, have promoted the development and useof bespoke forms of contract, tailored to each client.Such contracts generally use the FIDIC 4 ‘red book’form as a basis, amended to a greater or lesser degreedepending upon the risk profile of each client.

In the public sector, all works are procured on aremeasurement basis. The private sector, however,uses either fixed-price lump-sum or remeasured

contracts.

It is worth noting that there is no standard method ofmeasurement of building works for Lebanon and theRICS Principles of Measurement (International) forWorks of Construction (POMI) is widely used.

Design and build contracts are not yet popular inLebanon.

Both arbitration and litigation methods are availablefor dispute resolutions in the private and public

sectors.

Oman

OmanPublic works in Oman are undertaken using a

bespoke government contract known as the StandardDocuments for Building and Civil Engineering Works,4th edition, 1999. The document is based on earlyFIDIC contracts with the 4th edition containing onlyminor changes from the previous 3rd edition, 1981.The most important change is that the contract is nowprinted in Arabic. The Ministry of Legal Affairs is in theprocess of preparing a new edition but its launch dateis yet to be published.

The Standard Document facilitates both a

remeasurement and lump-sum contract dependenton a choice of clauses, and is based upon a fullycompleted design, specification and bill of quantities.The RICS Principles of Measurement (International)are the most widely used method of measurement.

Infrastructure projects have their own method ofmeasurement, as detailed within the Ministry ofTransport and Communications document, HighwayDesign Standards. Oman Tender Board laws requireall government projects to utilise the StandardDocuments on every project, without amendment. In

addition, the Tender Board facilitates all governmenttenders, centrally, through the tender board process.Only Royal Office and Royal Court of Affairs projectsare exempt from this process although they do gothrough a similar internal tender process.

Standard Documents are commonly used by privatesector clients in the local market, particularly forsmall-to-medium sized contracts. Private clients tendto prefer the 3rd edition as this is written in English,but varies only in a minor way from the Arabic 4thedition — preferred by the government ministries.

International and private sector clients with largeproject contracts, US$150 million-plus, commonlyuse an amended version of the FIDIC “red book.” Whilstsome of the larger integrated tourism developmentshave used a design build form of contract, design andbuild as a procurement route is not routinely used.



58

Qatar

QatarIn Qatar the most common forms for building works

are those issued by the Public Works departmentsthrough the Ministry of Municipal Affairs andAgriculture (MMAA) and the Qatar Petroleum Company(QP). These are lump sum contracts, generally usingbills of quantities or specifications and drawings.These contracts are onerous and slanted towards theclient, but are usually administered in a reasonablemanner.

In the private sector, similar contractual arrangementsare adopted. However, there are now someconstruction projects being let using cost plus or

design and build arrangements, although these areusually for smaller scale fitting out or highly specialistworks.

The market has seen an increase in the number ofFIDIC based contracts being implemented for bothprivate and key public sector clients. In addition, insome very long duration contracts, the government isbeginning to introduce a price adjustment mechanismto allow compensation for fluctuations in marketprices.

Before any contract is awarded, there are commonlya number of rounds of negotiation, during which theprice and other contractual terms can be modified torespond to a reduction in contract price.

UAE

UAEConstruction contracts in the UAE are predominantly

based upon the FIDIC forms of contract. The growingnumber of large scale developers and major repeatclients in the region has led to the development ofbespoke forms of contract, tailored to each individualclient. Such contracts generally use the FIDIC 4‘red book’ form as a basis, amended to a greater orlesser degree depending upon the risk profile of eachclient. This also applies to works procured by DubaiMunicipality. Abu Dhabi Municipality, however, basesits contract on a modified FIDIC 3 form, taken fromthe 3rd edition of the FIDIC Conditions of Contract for

Works of Civil Engineering Construction.

Contracts based on the 1999 ‘red book’ are nowstarting to be used in the UAE, but in general themarket remains firmly rooted in the FIDIC 4 form.

Civil works contracts within the UAE are mostlyprocured on a remeasurable basis, whereas buildingworks will generally be based on a fixed-price lumpsum.

However, there are exceptions. More and more clients

are procuring projects using a fast track approachand will therefore incorporate a remeasurableelement, reflecting those parts of the design which areincomplete at tender stage.

Design and build contracts are used on some majorprojects, but this procurement route is not yetcommonplace. The increasing tendency for clients todemand a fast track approach to projects does requirea greater design input from the contractor, but thisrequirement is not always formalised in the contractwording itself.



59

BUILDING REGULATIONSAND COMPLIANCE

This sections outlines the procedures forobtaining building permission across theregion.

The AECOM Project Management teamis experienced in the procedures forobtaining Building Permits across theregion and is able to oversee this process.

Bahrain

Procuring a Municipal Building Permit inBahrain is done through a three-stageprocess:

Stage 1: Seeking the Preliminary BuildingPermitThis is preliminary permission sought fromthe Municipality of Bahrain. To completethe application it is generally sufficientto include simple outline plans, cross-sections to indicate overall heights andan area statement. The main authoritiesinvolved at this stage are the Municipality,the Physical Planning Directorate and theRoads Directorate.

Stage 2: Informing the various

DirectoratesThis should be done in writing to theTown & Village Planning Directorate,Roads Directorate, the Civil Defence andFire Services Directorate, the ElectricityDistribution Directorate (EDD), EDDDamage Protection and Control Unit,the Sanitary Engineering Operationsand Maintenance Directorate, the WaterDistribution Directorate and Batelco. Theinitial contact should be made throughthe Central Planning Office (CPO) of theMinistry of Works.

Copies of the Title Deeds must besubmitted at this stage. All relevantinformation and documentation is givento each of the above Directorates, until thefinal Building Permit is in hand.

Stage 3: Obtaining the Final MunicipalBuilding PermitThis is the third and last stage and is

processed through each of the Directoratesin specific sequence. The initial contactshould be made through the MunicipalityOne Stop Shop. All documents, drawingsand Municipality forms must be filledin and submitted together with theappropriate fees for each Directorate.

Municipal charges must be paid for thefollowing elements:1. Site sign board.2. Insurance on the site sign board.3. Insurance for Construction Contract

(refundable).4. Fee for occupying road.

If the Environmental Affairs Departmentare involved in the process, they willcharge a reviewing fee.

Kingdom of Saudi Arabia

Obtaining a Building Permit in theKingdom of Saudi Arabia varies fromregion to region, however they tendto follow the same basic principles.The various procedures and approvalsfrom the Main Municipality, the BranchMunicipality and the Fire Departmentneed to be obtained. Obtaining theseapprovals typically takes between three tofour months depending on the nature andsize of the building/project.



60

The following is a general outline of thesteps needed to obtain a Building Permit:

Stage 1: Obtaining letter from the MainMunicipalityA letter from the owner is submitted to

the main Riyadh Municipality, along witha copy of the land deed. The Municipalitychecks the masterplan of the area toensure the suitability of the plot forthe construction of a building. TheMunicipality then writes a letter to theBranch Municipality of the area wherethe plot is located. This process takes fivedays and does not incur a charge.

Stage 2: Obtaining Preliminary LocationPermit from Branch MunicipalityThe owner submits a copy of the letterobtained previously from the MainMunicipality to the Branch Municipality,requesting an inspection of the plot toensure that the plot length, width andtotal area are as indicated on the deed.The Branch Municipality then issues an

approval to use the land. This processtakes five days and does not incur acharge.

Stage 3: Obtaining approval from the FireDepartmentThe Branch Municipality writes to the FireDepartment, or Civil Defence, to obtainits approval of the plan submitted by theowner for the fire-alarm and fire-fightingsystems. The Fire Department approvesthese plans and sends them back to theMunicipality. This process takes ten daysand does not incur a charge.

Stage 4: Obtaining a Final Building PermitThe Branch Municipality issues aBuilding Permit and sends it to the MainMunicipality for approval, which is given

dependent on the nature of the building.The owner can collect the Permit fromthe Main Municipality after one to threemonths. The cost of this Permit is SAR1,200.

Lebanon

Obtaining a Building Permit in Lebanonrequires various procedures andapprovals from the Order of Engineersand Architects, the Urban Planning

(Development) Department, statutoryauthorities and the Local Municipality. Thetime needed to obtain these approvals istypically between six and twelve months.

In general, the procedures and documentsrequired for obtaining a Building Permitare the same throughout Lebanon, exceptfor the cities of Beirut and Tripoli wherethe Urban Development Department is

located within the individual Municipality.The following is a general outline of thesteps needed to obtain a Building Permit:

Stage 1: Obtaining ‘Ifadat Takhteet WaTasneef’To obtain this the following documentsmust be submitted to the Urban Planning(Development) Department:

1. Real Estate Registry (Ifedeh Ikarieh)from the Real Estate Department ineach Mohafaza.

2. Official Land Survey (Kharitet Masaha)from the Cadastre Department.

3. Receipt ‘Wasel Takhteet Wa Irtifak’from the Municipality.

Stage 2: Appointing a registered civilengineer or an architect from the Order

of Engineers and Architects to finish thePermit fileThe engineer must submit the followingdocuments:1. Three copies of the Contract

Agreement between the owner and theappointed engineer.

2. Four copies of the preliminary designdrawings.

3. A written undertaking from theappointed engineer to submit theexecution drawings.

4. A contract with other engineersinvolved in the project.



61

Following no objection from the Order ofEngineers and Architects, the appointedengineer or the owner must pay themthe Building Permit fees to enable themto present the Building Permit file tothe Urban Planning (Development)

Department.

Stage 3: Appointing a chartered landsurveyor to prepare a topographicdrawing of the landThe appointed chartered land surveyormust prepare a topographic drawing ofthe land illustrating the different levels ofthe plot and register this at the Syndicateof Land Surveyors.

Stage 4: Submitting the Building Permitfile to the Order of Engineers andArchitects for their approvalThe appointed engineer must submit anapplication which includes a copy of theBuilding Permit file for power connectionto Electricité du Liban (EDL) and for otherstatutory authorities depending on the

region in which the building is located.

Stage 5: Study of Building Permit file1. Submit and register the full Building

Permit file to the Urban Planning(Development) Department. They willinspect the property and plans toensure they conform to constructionlaws and regulations and then issueclearance for the Building Permit.

2. The Urban Planning Departmentcalculates the Building Permit taxesdepending on the area of the buildingand the region in which this building islocated.

3. On approval by the Urban Planning(Development) Department, part ofthe calculated building taxes need tobe paid to the Order of Engineers. The

Building Permit file is withdrawn fromthe Urban Planning Department andregistered at the Municipality.

4. On approval of the Building Permitby the Mayor, the owner shall pay

the Building Permit taxes to theMunicipality and the Ministry ofFinance.

Stage 6: Obtaining the Building PermitThe applicant collects the Building Permit

from the Municipality. The appointedengineer is allowed to apply at the Orderof Engineers and Architects for a letter ofcommencement of works following thesubmission of the execution file.

Oman

The following is a general outline of the

procedure for obtaining a building permitin the Sultanate of Oman but there aremany further obligations and proceduresto be completed within each of the stages.It is generally the responsibility of the leadconsultant to obtain the building permit,although all applications must be signedoff and submitted by locally registeredconsultants.

Stage 1: Submitting concept design/ master plan stage applicationThe applicant submits a Concept Design/Master Plan application to the Ministry ofHousing - Directorate General of Planningfor approval of the proposed usage. Atthe same time utility requirements areidentified and indicated to the relevantutility providers. If the project is tourismrelated, further approvals are requiredfrom the Ministry of Tourism and theSupreme Committee for Town Planning.

Stage 2: Obtaining No ObjectionCertificates (NOCs)No Objection Certificates are obtainedfrom various governmental and municipaldepartments, including, Royal OmanPolice, Security Department, Traffic

Department and Civil Defence, Ministryof Environment, Municipality RoadDepartment, Ministry of Transport &Communications, Civil Aviation, and



62

many more project-specific ministrydepartments, e.g. Ministry of Education ifthe project is a school or university.

Stage 3: Submitting a building permitapplication

The full building permit application,including all NOCs, is submitted tothe relevant municipality or statutoryauthority.

Stage 4: Obtaining building occupancycertificateUpon completion of the building works, itis the responsibility of the constructioncontractor or lead consultant to obtainthe occupancy permit. This is achievedby having the building permit signedoff, effectively closing it out. To obtainthis closure, the contractor must obtaincertificates and signatures from variousgovernment departments, including CivilDefence, Food and Hygiene, etc, prior topresenting these to the municipality orstatutory authority for final approval.

Qatar

Compared with many countries, theplanning and building approval process inQatar is relatively clear and structured.

Land ownership, other than by Qatarinationals and the state, is still extremelylimited. The key process in securingdevelopment rights is obtaining a landtitle or ‘pin’ number; since without it allother permits and applications cannotbe commenced. Once the land is secured,the project masterplan is submitted forapproval to the Planning Department andlocal Municipality offices.

Stage 1: DC1 Approval

General overviews and strategies forthe utilities and primary infrastructureare submitted to the relevant utilitycompanies for comment. During this

process each department generally issuesa series of reference numbers which arethen used as the file number for all futuresubmissions. The culmination of thisround of submissions is the DC1 approval.

Stage 2: DC2 ApprovalAs the design develops, a second roundof submissions is made to the sameutility departments for final approval. Inaddition, a submission is made to the CivilDefence department who review the fireand life safety aspects of the project.

Depending upon the scale and nature ofthe project, separate traffic studies maybe required and these would be submittedto the Road Affairs Department forapproval.

Stage 3: Building PermitOnce the DC2 approval is secureda further set of standard forms arecirculated with a consolidated set ofdocuments for final signing and approval.

These documents constitute the BuildingPermit.

As a general guide the whole processusually takes at least 80 days, dependingupon the quality of the submission,although in practice if often takes muchlonger due to comments from differentdepartments and progressive designrevisions.

During the whole of this process, it isgenerally not advisable to revise or modifyany submission as it may delay theapproval process.

All submissions have to be either inArabic or bilingual and endorsed bylocally registered and approved design

companies. International companiescannot make these submissions bythemselves.



63

There are some parts of Qatar that areexempt from the Building Permit approvalprocess, but these are generally related tothe oil and gas production facilities.

Recently a number of revisions have been

made to the design standards of buildings,in particular high rise structures. Theseaddress issues such as fire safety, refugeareas, the use of lifts in the event of fire,and the nature and extent of façadeglazing.

All fit-out projects are being broughtunder the control of the regulatorydepartments, in particular Civil Defence,and all such works are now requiredto be submitted for approval prior tocommencement. This submission must bemade by a registered local consultant andfailure to do this can significantly delaythe approval and permitting process.

UAE

The following is a general outline ofthe procedure for obtaining a BuildingPermit in the UAE, but there are manyfurther obligations and procedures tobe completed within each of the stages.Building Permit application Stage 3,for example, requires no less than 15different forms, documents and separateapprovals to be submitted as part of theapplication.

It is the responsibility of the constructioncontractor or lead consultant to obtain theBuilding Permit, although all applicationsmust be signed by locally registeredconsultants.

Stage 1: Submitting PreliminaryApplication

The applicant submits a preliminaryapplication to the relevant Municipality orstatutory authority and pays a deposit.

Stage 2: Obtaining No ObjectionCertificatesNo Objection Certificates (NOCs) areobtained from various governmental andmunicipal departments including CivilDefence, Fire Department, Drainage,

Communication, Water and Electricity,Civil Aviation, Oil and Gas, Coastal andMilitary.

Stage 3: Submitting Building PermitApplicationThe full Building Permit application,including all NOCs, is submitted tothe relevant Municipality or statutoryauthority.

Stage 4: Obtaining Building PermitOn approval, the applicant collectsthe Building Permit and applies for aDemarcation Certificate.

Stage 5: Obtaining Building OccupancyCertificateUpon completion of the building works, it

is the responsibility of the constructioncontractor or lead consultant to obtainthe Occupancy Permit. This is achievedby having the Building Permit signedoff, effectively closing it out. To obtainthis closure the contractor must obtaincertificates and signatures from variousgovernment and quasi-governmentdepartments, including Civil Defence, Foodand Hygiene and CID, prior to presentingthese to the Municipality or statutoryauthority for final approval.

It should be noted that although processrequirements are fairly similar for freezones in Dubai, certain entities replaceothers e.g. Dubai Municipality will bereplaced with Tarakhees and Civil Defencewill be replaced with EHS.



64

REFERENCE

DATA

04



65

market forcesGLOBAL UNITE

Delivering evidence-based,

data-backed and real-time insightsGlobal Unite is AECOM’s own internationalbenchmarking and project performanceknowledge system. This system equips ourproject teams with the ability to capture,store and analyze data from all cost plans,giving teams the knowledge to deliverbetter project outcomes and minimiseproject budget risks. This gives our clients

unparalleled access to quality global andlocal knowledge that adds value to theirproject.

Insights gathered by accessing the GlobalUnite tool have the capacity not only toimprove project outcomes for our clientsbut also to build knowledge and supportthe advancement of our industry.

AECOM Global Unite ensures thatconstruction cost information is captured

in a way that is specific to Middle Eastprojects, and the other regions in theAECOM network, while at the same timeit allows the extraction and analysis ofdesign benchmarks for internationalcomparison.

Collect and share

project

performance data

to improve project

delivery



66

Global Unite is available as a web andtablet app for both iOS and Android.Using GUIDE (Global Unite IndicativeDesign Estimator), our project teams caninstantly engage with client, generatereports and do parametric modeling to

create construction cost models.

Measurement

The latest measurement software allows directmeasurement from the design team’s electronicdrawings (2D or 3D).

Accurate cost advice can be provided faster thanbefore and by collaborating with the design team,parameters can be set to maximise the potential costsavings.

Cost

Quantities and costs are measured and comparedagainst the Global Unite benchmark system. When thedesign is incomplete, Global Unite provides confidencethrough an extensive evidence-base.

Benchmarking and Analytics

Compare cost and design attributes against localor world’s best practice to better inform projectdecisions.

01University, NSW, 0.98

0

0

2.5

2.0

1.5

1.0

0.5

5.000 10,000 20,00015,000

Floor Area (m2)

Cost Plan Best Fit

E x t e r n a l W a l l : F l o o r R a t i o

Global Data Warehouse

Design and cost data from over 10,000 benchmarkedprojects centrally stored and globally accessible*.

Automated process that captures all projects by costmanagement stage.

All historic costs adjusted by location and time to suityour project.

*Increasing daily with every completed cost plan globally.



67

New York

San Francisco

Los Angeles

Toronto

Paris

London

Singapore

Sydney

Hong Kong

Auckland

Doha

Riyadh

Moscow

Dubai

Bahrain

Beijing

Johannesburg

Istanbul

Bangkok

Ho Chi Minh

Mumbai

RESIDENTIALAverage Standard High Rise Residential Average

High Rise

Luxury

High Rise

4,320 5,290

4,300 5,200

4,100 5,020

3,510 4,240

3,190 4,440

2,903 3,900

2,660 3,570

2,530 2,910

2,360 3,060

2,320 2,630

1,580 2,150

1,580 1,890

1,500 2,000

1,360 1,800

1,300 1,600

1,210 1,530

895 1,550

850 1,680

795 1,065

715 860

325 430

USD per square metreNote: Relative building costs based on Q2 2014, foreign exchanges rates as of 1 March 2014.Cities ordered by residential average standard high rise.

International Building Cost Comparison



68

COMMERCIALAverage Standard Office High Rise

New York

San Francisco

Los Angeles

Toronto

Paris

London

Sydney

Auckland

Hong Kong

Singapore

Moscow

Doha

Dubai

Riyadh

Johannesburg

Bahrain

Istanbul

Beijing

Ho Chi Minh

Bangkok

Mumbai

Average

Standard

Office

High Rise

Prestige

Office High

Rise

Major

Shopping

Centre

4,590 5,180 3,620

4,550 5,150 3,600

4,160 4,860 3,130

3,710 4,200 2,940

3,330 4,440 4,860

3,090 3,900 5,530

2,810 3,190 2,250

2,720 3,180 2,400

2,440 3,140 3,550

2,420 3,130 3,330

2,000 2,500 1,500

1,850 2,100 1,250

1,600 1,850 1,400

1,580 2,100 1,370

1,180 1,510 1,170

1,170 1,280 1,230

1,150 1,760 1,350

1,120 1,560 1,510

855 1,270 820

805 1,035 920

370 410 485

USD per square metreNote: Relative building costs based on Q2 2014, foreign exchanges rates as of 1 March 2014.Cities ordered by average standard office high rise.



69

INDUSTRIAL

Light Duty Factory

Singapore

Hong Kong

Paris

New York

San Francisco

London

Los Angeles

Toronto

Moscow

Doha

Istanbul

Riyadh

Dubai

Bahrain

Sydney

Auckland

Beijing

Mumbai

Bangkok

Johannesburg

Ho Chi Minh

Light Duty

Factory

Heavy Duty

Factory

1,790 N/A

1,670 N/A

1,670 2,500

1,650 2,160

1,620 2,130

1,580 2,610

1,350 1,840

1,320 1,7401,000 1,900

990 1,150

750 1,900

740 950

630 930

620 700

610 770

600 760

570 N/A

535 N/A

460 N/A

405 565

390 N/A

USD per square metreNote: Relative building costs based on Q2 2014, foreign exchanges rates as of 1 March 2014.Cities ordered by light duty factory.



70

TOURISM

5 Star Luxury Hotel

Paris

New York

San Francisco

London

Los Angeles

Hong Kong

Singapore

Toronto

Auckland

Sydney

Istanbul

Moscow

Doha

Dubai

Riyadh

Bahrain

Johannesburg

Beijing

Bangkok

Ho Chi Minh

Mumbai

5 Star

Luxury

Hotel

3 Star

Budget

Hotel

Resort

Style Hotel

6,530 3,060 3,470

5,430 2,590 5,400

5,290 2,540 5,400

5,220 2,610 2,970

5,180 2,430 5,290

4,540 3,340 N/A

4,440 2,900 4,210

4,310 2,070 4,400

4,110 2,990 3,750

4,030 2,910 3,660

3,800 1,870 1,750

3,500 2,200 2,700

3,500 2,100 3,950

3,000 2,150 3,600

2,780 1,790 3,360

2,620 1,800 3,200

2,370 1,795 2,840

2,360 1,150 2,960

1,615 860 1,555

1,375 775 1,300

1,035 625 1,190

USD per square metreNote: Relative building costs based on Q2 2014, foreign exchanges rates as of 1 March 2014.Cities ordered by 5 star luxury hotel.



71

International Building Cost Comparison

Building Type (USD / m²) Sydney Auckland Bahrain Dubai Doha RiyadhHongKong

Residential

Average Multi Unit High Rise 2,530 2,320 1,300 1,360 1,580 1,580 2,360

Luxury Unit High Rise 2,910 2,630 1,600 1,800 2,150 1,890 3,060

Commercial

Average Standard OfficesHigh Rise

2,810 2,720 1,170 1,600 1,850 1,580 2,440

Prestige Offices High Rise 3,190 3,180 1,280 1,850 2,100 2,100 3,140

Major Shopping Centre 2,250 2,400 1,230 1,400 1,250 1,370 3,550

Industrial

Light Duty Factory 610 600 620 630 990 740 1,670

Heavy Duty Factory 770 760 700 930 1,150 950 N/A

Hotel

3 Star Budget 2,910 2,990 1,800 2,150 2,100 1,790 3,340

5 Star Luxury 4,030 4,110 2,620 3,000 3,500 2,780 4,540

Resort Style 3,660 3,750 3,200 3,600 3,950 3,360 N/A

Other

Multi Storey Car Park 800 810 620 700 850 630 1,110

District Hospital 3,610 3,350 2,450 3,050 3,800 2,100 N/A

Primary & Secondary Schools 1,640 2,070 1,510 1,500 1,300 1,160 2,440

Ex. Rate at 1 March 2014 AUD NZD BHD AED QAR SAR HKD

1 USD = 1.11 1.19 0.37 3.67 3.63 3.75 7.76

Costs based on Q2 2014. Exchange rates based on 1 March 2014Prices exclude land, site works, professional fees, tenant fitout and equipmentHotel rate includes FF&EExcl. GST/VATMoscow residential and commerical rates includes FF&E

Exchange rate based on 1 March 2014



72

Building Type (USD / m²) Beijing SingaporeHo Chi

Minh Mumbai BangkokJohan-

nesburgLos

Angeles

Residential

Average Multi Unit High Rise 1,210 2,660 715 325 795 895 4,100

Luxury Unit High Rise 1,530 3,570 860 430 1,065 1,550 5,020

Commercial


1,120 2,420 855 370 805 1,180 4,160

Prestige Offices High Rise 1,560 3,130 1,270 410 1,035 1,510 4,860

Major Shopping Centre 1,510 3,330 820 485 920 1,170 3,130

Industrial

Light Duty Factory 570 1,790 390 535 460 405 1,350

Heavy Duty Factory N/A N/A N/A N/A N/A 565 1,840

Hotel

3 Star Budget 1,150 2,900 775 625 860 1,795 2,430

5 Star Luxury 2,360 4,440 1,375 1,035 1,615 2,370 5,180

Resort Style 2,960 4,210 1,300 1,190 1,555 2,840 5,290

Other

Multi Storey Car Park N/A 750 345 175 340 435 1,510

District Hospital N/A N/A N/A N/A N/A 1,180 7,880

Primary & Secondary Schools N/A 1,590 N/A 290 N/A 810 3,580

Ex. Rate at 1 March 2014 RMB SGD VND INR THB ZAR USD

1 USD = 6.14 1.26 21080 61.84 32.50 10.73 1.00



73

Building Type (USD / m²)San

Francisco New York London Paris Moscow Istanbul Toronto

Residential

Average Multi Unit High Rise 4,300 4,320 2,903 3,190 1,500 850 3,510

Luxury Unit High Rise 5,200 5,290 3,900 4,440 2,000 1,680 4,240

Commercial


4,550 4,590 3,090 3,330 2,000 1,150 3,710

Prestige Offices High Rise 5,150 5,180 3,900 4,440 2,500 1,760 4,200

Major Shopping Centre 3,600 3,620 5,530 4,860 1,500 1,350 2,940

Industrial

Light Duty Factory 1,620 1,650 1,580 1,670 1,000 750 1,320

Heavy Duty Factory 2,130 2,160 2,610 2,500 1,900 1,900 1,740

Hotel

3 Star Budget 2,540 2,590 2,610 3,060 2,200 1,870 2,070

5 Star Luxury 5,290 5,430 5,220 6,530 3,500 3,800 4,310

Resort Style 5,400 5,400 2,970 3,470 2,700 1,750 4,400

Other

Multi Storey Car Park 1,800 1,800 730 830 650 550 1,470

District Hospital 8,100 7,340 3,130 3,750 2,250 1,640 6,600

Primary & Secondary Schools 4,270 4,270 2,610 3,060 1,400 1,100 3,480

Ex. Rate at 1 March 2014 USD USD GBP EUR RUB TRY CAD

1 USD = 1.00 1.00 0.59 0.72 35.87 2.20 1.11



74

Regional Building Cost Comparison

Building Type (USD / m²)Beirut,

LebanonRiyadh,

KSADoha,Qatar

Manama,Bahrain

Muscat,Oman

Dubai,UAE

Residential

Average Multi Unit High Rise 1,500 1,580 1,580 1,300 N/A 1,360

Luxury Unit High Rise 1,800 1,890 2,150 1,600 N/A 1,800

Individual Prestige Houses 2,200 1,680 2,000 1,700 2,050 1,600

Commercial/Retail

Average Standard Offices HighRise

1,200 1,580 1,850 1,170 N/A 1,600

Prestige Offices High Rise 2,590 2,100 2,100 1,280 N/A 1,850

Major Shopping Centre 1,250 1,370 1,250 1,230 1,010 1,400

Industrial

Light Duty Factory 825 740 990 620 780 630

Heavy Duty Factory 1,100 950 1,150 700 990 930

Hotel

3 Star Budget 1,850 1,790 2,100 1,800 1,650 2,150

5 Star Luxury 3,300 2,780 3,500 2,620 2,690 3,000

Resort Style N/A 3,360 3,950 3,200 3,410 3,600

Other

Multi Storey Car Park 550 630 850 620 780 700District Hospital 3,000 2,100 3,800 2,450 2,310 3,050

Primary & Secondary Schools N/A 1,160 1,300 1,510 1,300 1,500

LBP SAR QAR BHD OMR AED

US$ 1= 1,484 3.75 3.63 0.37 0.38 3.67

Middle EastRelative Cost of Construction

86

Manama,

Bahrain

93

Muscat,

Oman

96

Riyadh,

KSA

100

Dubai,

UAE

104

Beirut,

Lebanon

115

Doha,

Qatar

Note: Relative cost of construction are based on typical build costs in USD. Influence of foreign exchangefluctuations, unique site conditions, design attributes and applicalbe tariffs must be considered whencomparing actual projects. Relative costs are based on an average across all sectors.



75

Mechanical & Electrical Cost Comparison

Building Type (USD / m²)Beirut,

LebanonRiyadh,

KSADoha,Qatar

Manama,Bahrain

Muscat,Oman

Dubai,UAE

Q2 2014 Q2 2014 Q2 2014 Q2 2014 Q2 2014 Q2 2014

Residential

Average Multi Unit High Rise 350 380 445 440 N/A 420

Luxury Unit High Rise 450 560 550 730 N/A 560

Individual Prestige Houses N/A N/A N/A N/A 780 N/A

Commercial/Retail

Average Standard Offices High Rise 350 505 555 N/A N/A 460

Prestige Offices High Rise 435 760 630 670 N/A 600

Major Shopping Centre 560 340 350 420 450 540

Industrial

Light Duty Factory 250 305 315 350 320 370

Heavy Duty Factory 325 350 420 400 435 495

Hotel

3 Star Budget 285 520 70 580 650 420

5 Star Luxury 690 1,100 900 870 1,430 845

Resort Style N/A 1,210 945 1,000 1,690 910

Other

Multi Storey Car Park 150 240 145 120 140 135

District Hospital 1,030 1,010 1,480 1,065 1,102 1,280

Primary & Secondary Schools N/A N/A 400 N/A 365 N/A


US$ 1= 1,484 3.75 3.63 0.37 0.38 3.67



76

Major Measured Unit Rates

Description UnitBeirut,

LebanonRiyadh,

KSADoha,Qatar

Manama,Bahrain

Muscat,Oman

Dubai,UAE

Unit Rates in US$ Q2 2014 Q2 2014 Q2 2014 Q2 2014 Q2 2014 Q2 2014

Basement Excavation m³ 15 12 14 7 5 4

Foundation Excavation m³ 16 14 15 8 7 14

Imported Structural Fill m³ 35 14 32 18 13 22

Concrete in Pad Footings(25mpa)

m³ 125 131 150 117 93 95

Concrete in Walls (32mpa) m³ 135 137 160 122 101 112

Concrete in Slabs (32mpa) m³ 125 137 160 117 96 109

Formwork to Slab Soffits(under 5m high)

m² 20 34 44 20 23 31

Formwork to Side andSoffits of Beams

m² 23 42 44 21 18 33

Precast Wall PanelArchitectural with SandBlast Finish

m² 200 210 185 205 246 182

Reinforcement in Beams kg 1.1 1 1.4 1 1 1

Structural Steel in Beams kg 3.5 4 4 3 3 3

Structural Steel in Trusses kg 3.5 4 4 3 3 3

Hollow Concrete BlockPartition (200mm thick)

m² 30 32 44 27 22 54

Aluminium FramedWindow (6.5mm clear glasscommercial quality)

m² 250 462 260 220 263 272

Aluminium CurtainWall System (includingstructural system)

m² 700 646 600 583 513 540

Average Quality Steel Stud

Partition (with single layerplasterboard each side)

m² 50 54 95 52 54 40

Suspended Mineral FibreCeiling

m² 32 37 36 40 33 45

Paint on Plasterboard Walls m² 10 8 5 5 5 5

Ceramic Tiles to Walls m² 35 37 70 53 33 45

Average Quality MarblePaving on Screed

m² 130 168 200 160 109 163

Anti Static Carpet Tiles to

Office and Admin Areas

m² 65 63 74 50 71 55


US$ 1= 1,484 3.75 3.63 0.37 0.38 3.67



77

Major Material Prices

Description UnitBeirut,

LebanonRiyadh,

KSADoha,Qatar

Manama,Bahrain

Muscat,Oman

Dubai,UAE

Prices in US$ Q2 2014 Q2 2014 Q2 2014 Q2 2014 Q2 2014 Q2 2014

ORDINARY PORTLAND CEMENT

In Bags Tn 100 91 87 87 86 90

In Bulk Tn 93 81 85 80 76 83

SAND

Sand for concreting m³ 22 17 27 20 12 25

AGGREGATE

19mm Aggregate m³ 17 22 36 25 12 18

READY MIXED CONCRETE

Grade 50 (OPC) m³ 95 75 110 90 85 100

Grade 40 (OPC) m³ 86 70 105 80 74 87

Grade 20 (OPC) m³ 76 60 97 69 62 72

REINFORCING STEEL

High tensile Tn 590 750 945 800 737 890

Mild Steel Tn 605 750 890 800 740 969

HOLLOW CONCRETE BLOCKWORK

100mm thick m² 5 9 10 18 6 10

200mm thick m² 9 11 11 20 7 13

STRUCTURAL STEELWORK

Mild steel grade 50 to BS4360

Tn 1,500 1,500 1,575 1,300 1,311 817

TIMBER

Hardwood Meranti m³ 1,600 765 1,185 790 819 584

Softwood m³ 550 450 790 395 403 379

FUEL

Diesel Litre 0.86 0.07 0.27 0 0.39 0.94

Petrol Premium 95 Litre 1.12 0.16 0.25 0 0.33 0.50


US$ 1= 1,484 3.75 3.63 0.37 0.38 3.67

These cost rates (US$) are indicative and represent supply only costs of the materials listed. Location factors should be applied toaddress geographic variations in each country. The rates are exclusive of VAT (Value Added Tax) or similar, where applicable.



78

Labor Costs

Description Unit

Beirut,

Lebanon

Riyadh,

KSA

Doha,

Qatar

Manama,

Bahrain

Muscat,

Oman

Dubai,

UAE

Q2 2014 Q2 2014 Q2 2014 Q2 2014 Q2 2014 Q2 2014

Concreter Day 28 60 40 29 28 31

Steel Bender Day 28 65 40 58 28 45

Carpenter Day 38 65 44 58 29 42

Mason Day 35 65 44 50 29 41

General Labourer Day 23 33 30 40 32 37

Crane Operator Day 60 33 66 84 50 63Heavy MachineryOperator

Day 55 80 66 75 49 63

Dump Truck Driver Day 35 70 50 59 45 51

Plumber Day 38 85 60 75 40 47

Electrician Day 35 80 60 87 40 48

Foreman Day 95 110 95 132 77 52

Site Engineer Month 5,000 5,000 7,250 5,250 3,404 6,160

Construction Manager Month 10,000 13,000 14,500 11,130 6,029 12,320


US$ 1= 1,484 3.75 3.63 0.37 0.38 3.67

These rates (US$) 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 ofemployment; recruitment; visas/permits; paid leave; travel; accommodation; health and welfare; but- 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.



79

Middle East Indices

The UAE Tender Price Index is AECOM’sassessment of construction tender pricesin the UAE. It is compiled by AECOM’s

Middle East Business Intelligence teambased on actual returns of projects.

It is based on new build andrefurbishment projects across a varietyof construction sectors and covers allemirates of the UAE.

The Index is therefore a measure ofaverage price increases across differingproject types and locations. It should be

regarded as a guide only when lookingat any specific project, as the pricing ofindividual projects will vary depending onsuch factors as their complexity, location,timescale, etc.

60

70

80

90

100

110

120

130

140

150

160

Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016

UAE Tender Price Index and Material Index

TPI Baseline TPI Lower Range Forecast

TPI Higher Range Forecast Material Price Index

Source: AECOM, IMF, ME Steel*TPI Forecast is indicative only and is based on AECOM view as at July 2014**Material Price Index Forecast is inidcative and based on IMF Forecasts as at July 2014***Forecasts are subject to chance without prior notice once new information is available

Q4 2009=100UAE Tender Price Index and Forecasts

Annual Percentage Change (%)

2012 2013 2014 2015f 2016f

-5 1.4 3 - 4 4.6 4 - 6

Construction

Unit RatesIndex

Materials &

CommoditiesIndex

2009 103.5 89.6

2010 104.9 108.1

2011 100.1 125.8

2012 95.1 120.6

2013 96.5 114.4

2014e 99.6 112.3



80

T Y P I C A

L B U I L D I N G S E R V I C

E S S T A N D A R D S F O

R O F F I C E S

S u b j e c t

B C O ( U K )

S p e c i fi c a t i o n

2 0 0 9

B a h r a i n


U

A E S p e c i fi c a t i o n *

Q a t a r S p e c i fi c a t i o n

O m a n


L e b a n o n


N e t : G r o s s

R a t i o ( T y p i c a l )

8 0 -

8 5 %

7 0 -

8 0 %

7 5 -

8 0 %

7 0 -

8 0 %

7 0 -

8 0 %

8 0 -

8 5 %

O c c u p a n c y S t a n d a r d s -

T y p i c a l

1 : 8 -

1 : 1 3 / m ²

1 : 1 0 -

1 : 1 4 / m ²

1 : 1 0 -

1 : 1 5 / m ²

1 : 1 0 -

1 : 1 4 / m

²

1 : 1 0 -

1 : 1 5 / m ²

1 : 1 2 -

1 : 1 4 / m ²


D e a l e r

n o n e s t a t e d

1 : 7 -

1 : 1 2 / m ²

1 : 7 / m 2

1 : 7 -

1 : 1 2 / m

²

1 : 7 / m 2

1 : 7 / m ²


T o i l e t s

S i n g l e s e x 1 p

e r s o n

t o 1 2 m ² u s i n g

6 0 / 6 0 m a l e / f

e m a l e

r a t i o b a s e d o

n

1 2 0 %

p o p u l a

t i o n .

S i n g l e s e x 1 p e r s o n

t o 1 2 m ² u s i n g

7 0 / 3 0 m a l e / f e m a l e

r a t i o b a s e d o n

1 2 0 %

p o p u l a t i o n .

S

i n g l e s e x 1 p e r s o n

t o 1 2 m ² u s i n g

7 0 / 3 0 m a l e / f e m a l e


1 2 0 %


S i n g l e s e x 1

p e r s o n

t o 1 2 m ² u s i n

g

7 0 / 3 0 m a l e /

f e m a l e


1 2 0 %

p o p u l

a t i o n .


t o 1 2 m ² u s i n g

7 0 / 3 0 m a l e / f e m a l e


1 2 0 %



t o 1 4 m ² u s i n g

6 0 / 6 0 m a l e / f e m a l e


1 2 0 %


F o r m

o f A i r C o n d i t i o n i n g

F a n C o i l U n i t s ,

V R V / V R F

, V A V

,

D i s p l a c e m e n

t ,

C h i l l e d C e i l i n

g /

B e a m ,

N a t u r a l

o r m i x e d m o d

e

v e n t i l a t i o n .

F a n C o i l U n i t s

,

V A V

, D X

, C o n s t a n t

V o l u m e


, V A V

,

D

o w n fl o w U n i t s


, V A V

,

V A V w i t h R e -

H e a t ,

D X

, C o n s t a n

t

V o l u m e ,

p l a t e h e a t

e x c h a n g e r s


, V A V

,

D o w n fl o w U n i t s


, V A V

,

D i s p l a c e m e n t ,

C h i l l e d C e i l i n g /

B e a m

H e a t i n g a n

d A i r

C o n d i t i o n i n g I n t e r n a l

C r i t e r i a

2 4 o C

, + / - 2 o C

( S u m m e r )

2 2 o C

, + / - 2 o C

( W i n t e r )

2 2 o C

, + / - 1 o C

2 2 o C

, + / - 2 o C

2 2 o C

, + / - 2 o

C

2 2 o C

, + / - 2 o C

2 2 o C

, + / - 2 o C

F r e s h A i r S

u p p l i e s

1 2 -

1 6 L i t e r s

p e r

s e c o n d p e r p e r s o n

1 0 L i t e r s p e r


1 2 -



1 2 -

1 6 L i t e r

s p e r


1 2 -



1 2 -



V e n t i l a t i o n

- W C s ( E x t r a c t )

n o n e s t a t e d

1 2 A i r C h a n g e s p e r

H o u r

3

- 1 0 A i r C h a n g e s

p

e r H o u r

1 0 A i r C h a n g

e s p e r

H o u r

1 0 A i r C h a n g e s p e r

H o u r

N o n e S t a t e d

I n t e r n a l H e a t G a i n s -

L i g h t i n g l o a d

1 2 w / m ²

1 5 w / m ²

1 2 W / m ²

1 2 -

1 5 W / m

²

1 2 w / m ²

1 2 w / m ²

I n t e r n a l H e

a t G a i n s -

E q u i p m e n t l o a d ( T y p i c a l )

n o n e s t a t e d

2 5 w / m ²

1 5 W / m ²

1 5 W / m ²

1 5 w / m ²

1 2 w / m ²



81

S u b j e c t

B C O ( U K )


2 0 0 9

B a h r a i n


U

A E S p e c i fi c a t i o n *

Q a t a r S p e c i fi c a t i o n

O m a n


L e b a n o n


I n t e r n a l H e a t G a i n s -

E q u i p m e n t l o a d ( D e a l e r )

n o n e s t a t e d

6 0 -

2 1 5 w / m ²

4 5 W / m ²

N o n e

n o n e s t a t e d

N o n e

S u p p l e m e n t a r y c o o l i n g

a l l o w a n c e

( e . o . / % a

r e a )

2 5 w / m ² , 2 5 %

a r e a )

N o n e

2 5 W / m ² t o

2 5 % a r e a

N o n e

n o n e s t a t e d

2 5 w / m ² , 2 5 % a r e a )

A c o u s t i c s -

O f fi c e s

N R 3 5 -

4 0

N R 3 5

N

R 3 0 -

3 5

N R 3 0 -

3 5

N R 3 0 -

3 5

N R 3 5 -

3 8

A c o u s t i c s -

C o m m o n A r e a s

N R 4 0 -

4 5

N R 4 0

N

R 4 0 -

4 5

N R 4 0

N R 4 0

N R 4 0 -

4 5

P r i m a r y P o

w e r -

L i g h t i n g

1 2 w / m ²

1 5 w / m ²

1 2 W / m ²

1 2 -

1 5 W / m

²

1 2 -

1 5 W / m ²

1 2 w / m ²

P r i m a r y P o

w e r -

T y p i c a l

1 5 -

2 5 w / m ²

3 5 w / m ²

2 5 W / m ²

3 0 -

4 0 W / m

²

2 5 -

3 0 W / m ²

1 5 -

2 5 w / m ²

P r i m a r y P o

w e r -

D e a l e r

n o n e

4 0 0

, 8 0 0 o r 1

, 5 0 0 w

p e r d e s k

8 0 0 o r 1

, 6 0 0 W

/

p

e r s o n

N o n e

n o n e s t a t e d

n o n e

P r i m a r y P o

w e r U p g r a d e ( e / o

p o w e r / % a r e a )

2 0 -

2 5 w / m ² ,

2 0 -

2 5 %

a r e a .

N o n e

2 5 W / m ² t o

2 5 % a r e a

N o n e

n o n e s t a t e d

2 0 -

2 5 w / m ² , 2 0 -

2 5 %

a r e a .

L i g h t i n g -

O f fi c e

3 0 0 -

5 0 0 l u x

,

U n i f o r m i t y R a t i o 0

. 7

4 0 0 -

5 0 0 l u x

3 5 0 -

5 0 0 l u x ,

U

n i f o r m i t y R a t i o

0

. 8

5 0 0 l u x

4 0 0 -

5 0 0 l u x ,

U n i f o r m i t y R a t i o

0 . 8

3 0 0 -

5 0 0 l u x ,

U n i f o r m i t y R a t i o

0 . 8

L i g h t i n g -

S t a i r s / C i r c u l a t i o n

2 0 0 -

2 7 0 l u x

2 5 0 l u x

2 0 0 -

2 7 0 l u x

L i g h t i n g -

W C ' s

2 1 5 l u x

2 0 0 l u x

2 1 5 l u x

L i g h t i n g -

P l a n t r o o m s

2 1 5 l u x

1 5 0 l u x

2 1 5 l u x

P a s s e n g e r

l i f t s -

C a p a c i t y

a n d w a i t i n

g t i m e s

8 0 %

L o a d i n g

w i t h

2 5 S e c o n d w a i t i n g

i n t e r v a l , h a n d

l i n g

1 5 %

i n 5 m i n u t e s .

P o p u l a t i o n d e n s i t y

1 : 1 2

8 0 %

L o a d i n g w i t h


i n t e r v a l , h a n d l i n g

c a p a c i t y o f 1 1 %

t o

1 7 %



1 : 1 2

8

0 %


3

5 S e c o n d w a i t i n g

i n

t e r v a l , h a n d l i n g

1

5 %


P

o p u l a t i o n d e n s i t y

1 : 1 4

8 0 %


3 0 S e c o n d w

a i t i n g

i n t e r v a l , h a n

d l i n g

1 5 %


P o p u l a t i o n d

e n s i t y

1 : 1 4

8 0 %




1 5 %



1 : 1 4

8 0 %




1 5 %



1 : 1 4

* S

p e c i fi c t o t h e E m i r a t e o f A b u D h a b i ( d i f f e r i n g s t a n d a r d s i n t h e s e v e n

E m

i r a t e s ) . E x c l u d e s i m p l i c a t i o n s o f n e w b u i l d i n g c o d e r e g u l a t i o n s f o r t h e

E m

i r a t e d u e t o b e c o m e i n t o e f f e c t a t t h e b e g i n n i n g o f t h e 2 0 1 1

.



82

Exchange Rates

US$ 1.00 to local currency



83

Weights And Measures

Metric Measures and Equivalents

Length

1 millimeter (mm) = 1 mm = 0.0394 in

1 centimeter (cm) = 10 mm = 0.3937 in

1 meter (m) = 100 cm = 1.0936 yd

1 kilometer (km) = 1000 m = 0.6214 mile

Area

1 square centimeter (cm2) = 100 mm2 = 0.1550 in2

1 square meter (m2) = 10 000 cm2 = 1.1960 yd2 1 hectare (ha) = 10 000 m2 = 2.4711 acres

1 square kilometer (km2) = 100 ha = 0.3861 mile2

Capacity/Volume

1 cubic centimeter (cm3) = 1 cm3 = 0.0610 in3

1 cubic decimeter (dm3) = 1000 cm3 = 0.0353 ft3

1 cubic meter (m3) = 1000 dm3 = 1.3080 yd3

1 liter (liter) = 1 dm3 = 1.76 pt

1 hectoliter (hl) = 100 liter = 21.997 gal

Mass (Weight)

1 milligram (mg) = 0.0154 grain

1 gram (g) = 1000 mg = 0.0353 oz

1 kilogram (kg) = 1000 g = 2.2046 lb1 tonne (t) = 1000 kg = 0.9842 ton

USA Measures and Equivalents

USA Dry Measure Equivalents

1 pint = 0.9689 UK pint = 0.5506 liter

USA Liquid Measure Equivalents

1 fluid ounce = 1.0408 UK fl oz = 29.574 ml

1 pint (16 fl oz) = 0.8327 UK pt = 0.4723 liter

1 gallon = 0.8327 UK gal = 3.7854 liter

Imperial Measures and Equivalents

Length

1 inch (in) = 2.54 cm

1 foot (ft) = 12 in = 0.3048 m

1 yard (yd) = 3 ft = 0.9144 m

1 mile = 1760 yd = 1.6093 km

1 int. nautical mile = 2025.4 yd = 1.853 km

Area

1 square inch (in2) = 6.4516 cm2

1 square foot (ft2) = 144 in2 = 0.0929 m2

1 square yard (yd2) = 9 ft2 = 0.8361 m2

1 acre = 4840 yd2 = 4046.9 m2

1 sq mile (mile2) = 640 acres = 2.59 km2

Capacity/Volume

1 cubic inch (in3) = 16.387 cm3

1 cubic foot (ft3) = 1728 in3 = 0.0283 m3

1 fluid ounce (fl oz) = 28.413 ml

1 pint (pt) = 20 fl oz = 0.5683 litre

1 gallon (gal) = 8 pt = 4.5461 litre

Mass (Weight)

1 ounce (oz) = 437.5 grains = 28.35 g

1 pound (lb) = 16 oz = 0.4536 kg

1 stone = 14 lb = 6.3503 kg

1 hundredweight (cwt) = 112 lb = 50.802 kg

1 ton = 20 cwt = 1.016 tonne

Temperature Conversion

C = 5/9 (F – 32) F = (9/5 C) + 32



84

AECOM

MIDDLE EAST

CONSTRUCTIONSURVEY

05



85

ABOUT AECOM’S MIDDLEEAST CONSTRUCTION SURVEY

At the beginning of 2014, AECOM surveyedkey decision makers from government,developers, engineering and constructioncompanies operating in the Middle East. Allsurvey responses were gathered throughonline questionnaires. Company-specificresponses to the survey are kept strictlyconfidential by AECOM and only aggregate

data is published.

The Middle East Construction SentimentSurvey assesses the state of constructionindustry, examines the drivers and barrierscurrently at play and reflects on concernsexpressed by industry stakeholders.Respondents represent a cross-section oforganization sizes, locations and markets,including energy, transport, real estate,industrial, healthcare, education andgovernment.

The questions we ask of the industry fallinto the following categories:

• Industry prospects - Workload trends and expectations - Growth markets and sectors - Industry growth drivers and

obstacles to growth

- Confidence in market outlook andkey risks

• Investments - Organizational prospects - Workload trends and expectations - Opportunities for growth - Investment priorities

- Target markets and sector focus - Growth strategies and tools for

growth

• Project planning and delivery - Project Finance - Success factors and obstacles to

project delivery - Opportunities and risks - Competition and Costs

Encouraged by the results of this year’ssurvey we will continue to engage withour clients to discuss industry trends andprospects and how we can respond tochallenges and opportunities posed to usby our clients.

2014 MIDDLE EAST CONSTRUCTION SURVEY

Survey composition -Respondents operating sectors

Real Estate

Hospitality + Culture

Social Infrastructure, Civic, Defense

Transport

Industrial

Energy + Utilities

Other



86

DIRECTORY

OF OFFICES

06



87

MIDDLE EAST

Kingdom of BahrainManama OfficeAl Saffar HouseUnit 22B, Building No 1042Block 436, Road 3621Seef DistrictManama, BahrainPO Box 640

T: 973 17 588 769F: 973 17 581 288

[email protected]

Kingdom of Saudi Arabia

Al Khobar Office (Regional Head Office)AECOM Arabia Ltd.

Al Khereji Business Centre, Level 1King Faisal Road, Bandariyah DistrictAl Khobar, KSAPO Box 1272

T: 966 13 8494400F: 966 13 8494411

[email protected]

Jeddah Office7th Floor, Bin Sulaiman CenterAl Rawdah StreetPO Box 15362, Jeddah 21491Saudi Arabia

T: 966 2 606 9170F: 966.2.606 9205

[email protected]

Riyadh Office4th Floor, Tower 4Tatweer TowerKing Fahad RoadPO Box 58729Riyadh 11515

T: 966 11 200 8160F: 966 11 200 8787

[email protected]

Kuwait

Kuwait City OfficeOffice 5311, 2nd FloorDar Al AwadiAhmed Jaber StreetSharq, KuwaitPO Box 29927

T: 965 2 23 22 999F: 965 2 23 22 990

Lebanon

Beirut Office1st Floor, Chatilla BuildingAustralia StreetRawche, ShouranBeirut, LebanonPO Box 13-5422

T: 961 1 780 111F: 961 1 809 045



88

Oman

Muscat OfficePO Box 434, Al Khuwair,Postal Code 133Way No. 3933Building No. 2910Muscat, Oman

T 968 2 448 1664F 968 2 448 9491

[email protected]

Qatar

Burj Doha OfficeLevel 25PO Box 6650Burj Doha, West BayDoha, State of Qatar

T: 974 4 001 9150F: 974 4 001 9151

Jaidah Square (Qatar Head Office)4th Floor, Jaidah SquareUmm Ghuwalina, Al Matar StreetPO Box 6650Doha, State of Qatar

T: 974 4 407 9000F: 974 4 437 6782

United Arab Emirates

Abu Dhabi Region

Abu Dhabi Office (Regional Head Office)International Tower

Capital Center, Abu DhabiPO Box 53

T: 971 2 613 4000F: 971 2 613 4001

[email protected]

Al Ain OfficeLevel 1, Liwa Center BuildingPO Box 1419Al Ain

T: 971 3 702 6600F: 971 3 755 4727

[email protected]

Dubai and NorthernEmirates Region

Dubai OfficeUBora Tower, Levels 43 & 44PO Box 51028Business BayDubai

T 971 4 439 1000F 971 4 439 1001

[email protected]



89



90

About AECOM

Ranked as the #1 engineering design firm by revenuein Engineering News-Record magazine’s annualindustry rankings, AECOM is a premier, fully integratedinfrastructure and support services firm, with a broadrange of markets, including transportation, facilities,environmental, energy, water and government. Withapproximately 45,000 employees — including architects,engineers, designers, planners, scientists andmanagement and construction services professionals— serving clients in more than 150 countries aroundthe world, AECOM is a leader in all of the key markets

that it serves. AECOM provides a blend of global reach,local knowledge, innovation and technical excellence indelivering solutions that create, enhance and sustainthe world’s built, natural and social environments. AFortune 500 company, AECOM has annual revenue ofapproximately $8.0 billion.

More information on AECOM and its services can befound at www.aecom.com.

Follow us on Twitter: @aecom