Kuwait’s construction sector in groundswell

KUWAIT – The Kuwaiti construction industry increased in value at a compounded annual growth rate (CAGR) of 1 percent during the review period of 2007-2011, a new study on “Construction in Kuwait: Key Trends and Opportunities to 2016″ revealed.

The infrastructure construction market is expected to record a CAGR of 8.85 percent over the forecast period, to value KWD1.5 billion ($5.4 billion) in 2016.

The residential market is expected to record a CAGR of 8.31 percent over the forecast period, to value KWD668.5 million ($2.4 billion) in 2016.
Economic diversification attracted investments in the industrial and commercial markets, resulting in an increased level of construction activities. Commercial and industrial construction were the two categories demonstrating significant activity, following residential construction growth which was driven by high demand.

Infrastructure construction constituted a 48.1 percent share of the construction industry value in 2011 and grew at a CAGR of -1.29 percent during the review period. The negative CAGR can be attributed to a drop in investments by private companies and the postponement of ongoing projects due to the lack of adequate funds.

In contrast, the government is pursuing its priority for infrastructure development, since the $130 billion national development plan intends to focus on infrastructure expansion which will serve as a catalyst to the growing infrastructure sector in the country. The residential construction growth was largely driven by demand which drove the market to achieve a CAGR of 6.85 percent during the review period.

Although the construction industry of Kuwait was impacted by the 2009 global financial crisis, the residential market managed to grow better than other markets. The commercial construction market, which constituted a 17.4 percent share in the Kuwaiti construction industry, grew at a CAGR of 1.26 percent during the review period.

The government’s commitment to diversify and switch from an oil-dependent economy diverted investments into the commercial market.

Office building was the most significant category, as several oil companies have established headquarters in Kuwait or have moved in from Iraq because of the relative security and stability in Kuwait when compared to other countries in the Gulf region.

The office building category is expected to record a CAGR of 4.38 percent over the forecast period and, with the additional support of other growing categories, the overall commercial construction market is anticipated to achieve a CAGR of 4.26 percent.

Institutional construction is the smallest construction market in the industry, accounting for a 4.3 percent share of the industry value in 2011.
The market recorded a CAGR of 0.45 percent during the review period, primarily contributed by the high priority attached to the construction of educational and healthcare facilities in Kuwait.

Despite an increase in government expenditure, Kuwait’s ranking in the healthcare system index of the WHO (World Health Organization) dropped from 48 in 2009 to 75 in 2011. The educational and healthcare sectors will drive growth in the market which is anticipated to achieve a CAGR of 3.69 percent over the forecast period.

© The Saudi Gazette 2012,Aug 27 2012