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Let’s face it. The construction business has been in the the crapper for about six years now. Residential and commercial building has is still trying to recover from the devastation of the 2008 economic collapse. It’s hard to build when you can’t get the funding to do it. Some infrastructure giants like Balfour Beatty (LSE:BBY) have moved enough of their eggs to other baskets to avoid the negative impact of some of the world economies by operating in the more thriving ones. Ones like Dubai.
It was announced today that Balfour Beatty has landed a contract to expand what it already the world’s largest mall, located in Dubai, one of the most dynamic economies in the world. The £214 million project will create a “Fashion Avenue” between the Dubai Mall and the Burj Khalifa. If Burj Khalifa doesn’t ring a bell, it is the tallest building in Dubai. In fact, it is the tallest building in the world.
The announcement hasn’t appeared to have much of an effect on the Balfour Beatty share price. It’s down a half percent on the day to 281.00, so it’s doesn’t seem to have had much of an impact either way. This may be due in part to the company’s 2013 full year results that were published earlier this month, in which it reported a £90 million decline in pre-tax profits from the previous year’s £277 million.
The project should prove to be a boon to the company, although it is understandable that investors may not be running to trade shares based on that annual report.
The contract has actually been secured by Dutch Balfour Beatty, the company’s Dubai-based joint venture. In addition to the “Fashion Avenue,” the project will include development of new accesses to the facilities. The expansion will employ some 2,000 people to increase the mall’s capacity to accommodate more than 100 million visitors per year. That’s 8.3 million visitors per month. That’s a lot of shopping potential. I don’t know what the average dollar spent per visitor to the mall is, but if it is £100 (and I believe that to be far too low), you can do the simple math. It’s a lot of zeros, whether you calculate per month or per year.
My hat’s off to the government and the royal family of Dubai, who determined long ago that they would create a new destiny for their country – a destiny of sustained growth and increased wealth by becoming a vital commercial crossroads for the world.
Kudos also to Balfour Beatty. Establishing and maintaining lasting relationships in Dubai may be one of the best moves the company can make, both short term and long term.
