Around 22 kilometres north of Doha, Lusail City is slowly taking shape. Being built at a cost of $45 billion, the city is expected to house 200,000 residents and feature scores of entertainment, hospitality and retail developments, according to the development’s website. To show the shiny new city off to the world, Qatar has chosen the city’s stadium to host the opening and closing ceremonies of the 2022 World Cup. With its scale and high profile, Lusail has attracted many of the region’s leading developers to commit sizeable investment to the megaproject. “Lusail is considered a new destination for many residents looking to live in proximity to the capital while benefiting from a tranquil atmosphere,” says Niall McLoughlin, senior vice president at Damac, which has three projects in Lusail valued at $350 million. “We expect this area to expand further in the near future when several projects will take shape on the ground.”
Lusail is considered a new destination for many residents looking to live in proximity to the capital while benefiting from a tranquil atmosphere”
With projects such as Lusail, Qatar’s construction industry is powering on even as public spending cuts, resource shortages and doubts over construction standards threaten activity in the country. Confidence in the Qatari market among leading construction companies is 19 percentage points higher than it was last year, rising from 14 to 33 per cent of respondents, according to the results of law firm Pinsent Masons’ annual survey, published in early December. This is despite construction industry optimism in the outlook for 2016 falling by 45 percentage points to 32 per cent when respondents were asked to assess the six member states of the Gulf Cooperation Council as a whole. “Qatar’s smaller local population means it can ride out a low fuel price market for much longer than countries such as Saudi Arabia which have massive stimulus packages,” says Matthew Greene, head of research at CBRE. “The government has also signalled no intent to curb spending on key infrastructure projects and major developments for the World Cup such as Lusail.”
Feeding off the steady growth in the country’s population, Qatar’s real estate sector continues to generate fresh projects for the construction industry. Property demand in terms of both sales and rentals have held up surprisingly well in Qatar despite the regional slowdown, Greene says. “Compared to other markets in the GCC where rates have fallen, Qatar’s have largely remained flat and haven’t led to any noticeable reduction in construction activity.” But the market could see a decline next year as public spending levels are adjusted to lower energy-revenues, he says. “We haven’t seen the full effect of the economic climate yet, especially considering the 2015 budgets were drawn up after a half year of reduced revenues in 2014.”
With the number of projects being constructed across the country, resource shortages are becoming a problem for the industry, according to Sean Kelly, project developer at United Developers. The company is constructing the $1.25 billion Place Vendôme in Lusail City, a mixed-use retail and hospitality development that will have a canal running through it. Launched in 2014, construction on the project began in 2015 and is around 35 per cent complete. With the expected delivery date in 2017, Kelly says the construction team is battling procurement issues as it fights to keep on schedule. “The major challenge is that there are so many large infrastructural projects taking place in Lusail. There are about 60 different road, metro and World Cup projects being developed at the same time. This creates demand in the market that outstrips supply. So we’re competing for resources with companies doing infrastructure projects,” he says.
The race to build so much in such a short space of time has also raised questions about construction standards in the country—a concern underlined by widespread flooding damage caused to buildings by torrential rains in November. A leaking ceiling at Hamad International Airport—one of the country’s most prestigious projects, which only opened last year—was captured on video by witnesses and posted online. The incident has prompted an inquiry by the Prime Minister. Spokespersons from Hamad International were unavailable to comment. While leaking buildings suggest shabby workmanship in some corners of the industry, Kelly doesn’t foresee an overhaul of construction standards in the country coming as a result, as current building codes are sufficient already. “It’s hard to predict what the authorities will do with the situation, but it’s unlikely that construction standards will be revised. The rains were a random occurrence and beyond anyone’s control,” he says.
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