MARSH REPORT February 2017 Sky-high Risk: The Impact of Increasing Tall Tower Construction in the Middle East MARSH REPORT February 2017 CONTENTS 3 Introduction 6 Rising Heights, Rising Risks 8 Heightened Risk Mitigation 12 Mitigating And Transferring Tall Building Risks 13 Conclusion 14 About Marsh 14 About This report 2 Marsh MARSH REPORT February 2017 INTRODUCTION Skylines across the globe have been rising considerably over the past decade. One region where this trend towards taller construction has been particularly visible is in the Middle East. In recent years, the region has become the home to some of the tallest buildings in the world, and recently announced projects show that this trend is not stopping in the near future. With tall building projects skyrocketing, the monumental risks involved in constructing these projects must be considered carefully. Tall building projects are complex and represent a huge concentration of assets, and, if something does go wrong, it could lead to high costs for project developers. Sky-high Risk: The Impact of Increasing Tall Tower Construction in the Middle East 3 MARSH REPORT February 2016 FIGURE 1 The Middle East’s tallest buildings (completed and planned) Source: Skyscraper Center The graphic below (FIGURE 1) shows a selection of the tallest completed, under construction, and proposed buildings in the Middle East. Out of these buildings, 12 are proposed or under construction, demonstrating how skylines in these countries are set to reach new heights over the next decade, maintaining the growing trend towards tall tower construction. The region remained largely unchanged during the 1980s and 1990s, with only the Burj Al Arab (UAE), the Baynunah Hilton Tower (UAE), and the Al Attar Business Tower (UAE) being completed at a height of more than 150 meters. In contrast, since 2000, 276 buildings with a height of 150 meters or more have been built in the region, with a further 50 under construction and due for completion over the coming years. COMPLETED UNDER CONSTRUCTION PROPOSED 1000M 1000M 1000M 828M 800M 800M 711M 601M 600M 550M 600M 520M 485M 445M 412.6M 413.4M 432M METERS (M) 380.5M 381.2M 389M 392.4M METERS (M) 360M 360M 365M 365M 400M 356M 400M 200M 200M 0M 1 IL PRIMO TOWER ALMAS TOWER DUBAI 1 TOWER 1 BUSINESS BAY 2 BUSINESS BAY ELITE RESIDENCE BURJ MOHAMMED BIN RASHID TOWER RIYADH 23 MARINA AL HAMRA TOWER PRINCESS TOWER DIAMOND TOWER MARINA 106 THE JUMEIRAH BUSINESS BAY ENTISAR TOWER BURJ 2020 MAKKAH ROYAL TOWER CLOCK DUBAI ONE BURJ KHALIFA JEDDAH TOWER 0M 4 Marsh MARSH REPORT February 2016 FIGURE 1 The Middle East’s tallest buildings (completed and planned) Source: Skyscraper Center The Burj Khalifa in the UAE is currently the region’s tallest building standing at around 828 meters, followed by the Makkah Royal Clock Tower in Saudi Arabia, and the Princess Tower in the UAE. The Jeddah Tower, which is currently under construction in Saudi Arabia, will be the tallest building in the world when completed. While this massive increase has centred in Dubai, by the end of 2017, more than 16 cities in 8 countries in the region will have completed a building of 150 meters or taller. However, new construction opportunities available to build higher than ever put greater focus on the need to mitigate the associated risks as the Middle East plans its high-rise revolution.* * Note: Listed data for proposed or under construction buildings is based on information currently available. This data is subject to change until the building has been completed and does not include proposed buildings without confirmed height estimates. COMPLETED UNDER CONSTRUCTION PROPOSED 1000M 1000M 1000M 828M 800M 800M 711M 601M 600M 550M 600M 520M 485M 445M 412.6M 413.4M 432M METERS (M) 380.5M 381.2M 389M 392.4M METERS (M) 360M 360M 365M 365M 400M 356M 400M 200M 200M 0M 1 IL PRIMO TOWER ALMAS TOWER DUBAI 1 TOWER 1 BUSINESS BAY 2 BUSINESS BAY ELITE RESIDENCE BURJ MOHAMMED BIN RASHID TOWER RIYADH 23 MARINA AL HAMRA TOWER PRINCESS TOWER DIAMOND TOWER MARINA 106 THE JUMEIRAH BUSINESS BAY ENTISAR TOWER BURJ 2020 MAKKAH ROYAL TOWER CLOCK DUBAI ONE BURJ KHALIFA JEDDAH TOWER 0M Sky-high Risk: The Impact of Increasing Tall Tower Construction in the Middle East 5 MARSH REPORT February 2016 RISING HEIGHTS, RISING RISKS FIGURE 2 Locations of the Middle East’s tallest buildings (completed, planned, and under construction) Source: Skyscraper Center In the Middle East, increased Constructing a tall tower is investment in the region has led complicated, heightening many to rapid economic development. traditional construction risks and Construction projects for tall presenting a unique set of altogether towers in the region have increased new ones. Property developers considerably, with all of the 25 tallest need to be aware of the risks linked TURKEY Caspian towers in the region built within the with tall tower construction and take Sea past 20 years1. steps to mitigate losses that could occur. The decline in oil price has seen a reduction in the number of projects The risks of constructing these recently. However, we are continuing towers are two-fold for property SYRIA to see governments spending developers. It is not just the number LEBANON 1 2 significant sums on infrastructure. of these projects that needs to 2 Some activity has been fueled by be taken into consideration, but Mediterranean the Qatar World Cup in 2022 and also the fact that the height of the Sea Dubai Expo 2020, therefore, projects individual buildings is rising. IRAQ are needed to make sure the right For example, out of the top-25 tallest 1 infrastructure and accommodation buildings in the region, 22 were built 1 is in place to make both events a in the past 10 years. Many buildings JORDAN success. In addition, Dubai’s Vision that are planned or currently under 1 2030 is likely to continue to drive construction are following the same 131 KUWAIT investment in the coming decade. trend, with 26 supertall or mega- tall buildings planned or under 1 2 While the new builds are providing construction in the region. much-needed space for residents 13 and offices in the rapidly expanding EGYPT BAHRAIN region, building upwards is 3 not without considerable risk. QATAR 14 4 29 3029 20 UNITED COMPLETED UNDER CONSTRUCTION PROPOSED 3 ARAB Gulf of Oman EMIRATES UNITED ARAB ABU DHABI 31 DUBAI 30 DUBAI 14 EMIRATES AJMAN 1 AL FUJAYRAH 2 SAUDI ARABIA DUBAI 154 SHARJAH 8 BAHRAIN MANAMA 13 MANAMA 1 MANAMA 2 30 14 IRAQ SULAYMANIYAH 1 – – – – JORDAN AMMAN 1 – – – – Red Sea KUWAIT KUWAIT CITY 13 KUWAIT CITY 1 – – Arabian LEBANON BEIRUT 2 BEIRUT 1 BEIRUT 2 Sea QATAR DOHA 30 DOHA 3 DOHA 3 196 SAUDI ARABIA AL KHOBAR 1 DAMMAN 1 JEDDAH 1 YEMEN JEDDAH 4 JEDDAH 9 RIYADH 3 MECCA 7 MECCA 3 RIYADH 8 RIYADH 1 Gulf of Aden COMPLETED UNDER CONSTRUCTION PROPOSED 6 Marsh MARSH REPORT February 2016 FIGURE 2 Locations of the Middle East’s tallest buildings (completed, planned, and under construction) Source: Skyscraper Center TURKEY Caspian Sea SYRIA LEBANON 1 2 Mediterranean 2 Sea IRAQ 1 1 JORDAN 1 131 KUWAIT 1 2 13 EGYPT BAHRAIN 3 QATAR 14 4 29 3029 20 UNITED 3 ARAB Gulf of Oman EMIRATES SAUDI ARABIA 30 14 Red Sea Arabian 196 Sea YEMEN Gulf of Aden COMPLETED UNDER CONSTRUCTION PROPOSED Sky-high Risk: The Impact of Increasing Tall Tower Construction in the Middle East 7 MARSH REPORT February 2017 HEIGHTENED RISK MITIGATION SPOTLIGHT The increasing number of tall Until recently, a variety of towers has given rise to certain combustible materials were used Fire risk in tall towers perils before, during, and after for this purpose. While recent code Fire risk is compounded in a tall construction. There are several changes have dictated that flame building structure and can be risk and insurance challenges that retardant materials must be used to a risk during the construction developers and contractors need to help mitigate the risk of a building phase. Several tall tower projects consider and potentially transfer via quickly going up in flames, once the have gone up in flames in Dubai, insurance to remove unnecessary project reaches a certain height, possibly as a result of flammable risk from the balance sheet: firefighters could be unable to access building materials. In August the upper levels. 2016, a fire broke out on the top FIRE AND/OR ESCAPE OF floors of one of the city’s towers When buildings are under WATER that was under construction. construction, fires are a risk at Jumeirah Village Circle, the all stages. The formwork and The possibility of fire and/or the 60-storey project, sustained falsework, the variety of flammable escape of water represent significant considerable damage as a result. risks to a project’s practical oils used (including lubes, concrete completion date. Either one of curing materials, and hydraulic The fire was the latest of several these events has the potential to and diesel fuel), and the temporary fire incidents in UAE tall towers cause severe damage to the works storage of large amounts of carpets, over the past year, including and significant delays. This risk is furniture, and construction huts can Dubai’s Sulafa Tower in July and a multiplied in a tall tower, due to lead to intense fires, which can be tower in Ajman in March. the high concentration of value in a challenging for the local Some reports have linked the fires single structure. civil defence. to a type of building material used in the cladding of some tall towers The risk of fire in the construction Meanwhile, the escape of water, in the region.