Sunset in Beirut

From the middle of last century… to present

From the late 1950s to the early 1970s, Beirut witnessed an almost uninterrupted boom when it expanded spectacularly, to ultimately house half of the country’s population. Mountain towns and villages close to Beirut favored by tourists, such as Aley and Bhamdoun, also experienced a great expansion.

The post-conflict era demonstrated a new major construction explosion. Although this activity eventually slowed down, mainly due to a declining rate of cement deliveries and number of construction permits, according to recent Fransabank study, Lebanon’s GDP growth is expected to rise to 7 or 8 percent in 2018. The study emphasizes on the increasing public and private investments in Lebanon’s infrastructure (particularly in sectors like electricity, telecoms, roads, water), aiming the economic growth stimulation. Thus, Lebanon’s construction sector is expected to see a significant boost, especially following last April’s CEDRE donor conference, with a participation of 51 countries, resulting in $11.8 billion in pledges of financial assistance, out of which $11 billion are in soft loans.

The government’s Capital Investment Program (CIP) includes 250 infrastructure projects worth $17 billion, 20 percent of which are intended for infrastructure and development projects. It is also interesting to note that the Construction area Authorized by Permit (CAP) in Lebanon has increased by 15.44% in 2017. Mount Lebanon appeared as the top location for new constructions in 2017 absorbing 35.2% of total activity in terms of projects number.

However, despite those optimistic predictions, the actual construction activity, from the point of view of enterprise managers, pictures a contradictory situation. According to Banque du Liban quarterly business survey reflecting their opinions about the evolution of their businesses, general construction activity deteriorated in the first quarter of 2018, with the balance of opinions standing at -45 compared to – 39 in the first quarter of 2017.

The influence of refugees’ overflow

While Lebanese infrastructure seriously deteriorated in recent years due to lack of funding, the situation also worsened with the arrival of some 1.5 million Syrian refugees, who now represent about 25% of the population of Lebanon. This demographic influx has resulted in an increase of 15 to 25% of the volume of road traffic. A new financing package, that is expected to enhance Lebanon’s construction industry, amounts 295 million USD and was approved last March by the World Bank. Its aim is the modernization of Lebanon’s transport sector that will, at the same time, solicit the employment of several thousand unskilled Lebanese and Syrian workers. The Public Transport Project in Greater Beirut is the first initiative in several decades to renovate the Lebanese public transport

system. It will decongest the road network and at the same time, free private funding for vital infrastructure. The project foresees the creation of two million workdays in the construction sector, and will benefit low-income Lebanese and Syrian populations. As the first phase of an ambitious national public transport program, it is expected to carry around 300,000 passengers a day and halve travel times between Beirut and its northern suburbs. This operation will probably be followed by additional phases to cover the south and east entrances of the city.

The residential segment

While the influx of Syrian refugees burdens Lebanon’s existing infrastructure, it also impels additional investment into the construction sector. According to last year’s BMI Research estimation, the country’s absorption of Syrian refugees will require a “dramatic and wide-ranging ramp up of infrastructure investment”. This higher demand transpires opportunity. A number of power projects are currently in the construction pipeline aimed at addressing the country’s growing power deficit. These include the $ 470m Deir Ammar Combined Cycle Plant, where General Electric and Greece-based J&P-AVAX have secured equipment and construction contracts, respectively. The government is also considering renewable projects and, according to BMI Research, has three wind projects each valued at between $100m to $150m under final review.

Paradoxically, the Beirut Central District, although exposing a high number of completed buildings, has been hit hard by stagnation that began in 2011. Following the summer 2006 war, Lebanon’s economic boom and pent-up demand drove construction activity to heights not seen since the 1990s. From 2007 until 2010, developers built frenetically, targeting the expensive tastes of Lebanese expatriates and foreign clients, based mainly in the Gulf. Unfortunately, while uprisings throughout the Middle East eventually took root in Syria, many investors pulled out, pushing the Lebanese economy into a perseverant economic stagnation. As a consequence, the legacy of the boom years today is an overabundance of luxury residences in the downtown area, often with a price tag over a million dollars.

Eventually, the 2015 garbage protests resulting in security repression also contributed to the closure of numerous bars and businesses. The Downtown may have been built, but its occupation rate remains low.

The construction paradoxes of Lebanon

The commercial real estate segment

According to RAMCO, Real Estate Advisers, 58% of the projects under construction in Beirut are located in Ashrafieh, where 16 construction sites are presently in progress compared to 20 projects in 2017. Although the housing and office segments in Lebanon haven’t been bright lately, F&B clusters prospects seem more promising. Indeed, today Lebanon counts 8 established F&B clusters which together hold over 70 restaurants and pubs. Given the Lebanese lifestyle, the success of F&B clusters is not surprising, as F&B outings are one of inhabitants preferred entertainment. Hence, new F&B concepts are usually a successful outcome of visitors constantly in search of newest F&B experiences. One could even argue that some Lebanon streets like Mar Mikhael and Badaro are already

clustered along one street, but their lack of on-site parking constitutes a huge disadvantage. This explains the success of F&B clusters that came into the market offering an appropriate combination of several leisure activities (shopping, dining, and nightlife) with appropriate parking facility on the same spot.

Tourism

In the context of tourism, the private sector significantly invests in the modernization and expansion of this sector and international hotel companies have returned to Lebanon. Lebanon is the only country in the Arab world that offers skiing and related winter sports activities. The largest ski resort in the country has been expanded and modernized. Lebanon’s tourism industry also relies on the large number of Lebanese living abroad, who return regularly to the country during the summer season.

Corniche Beirut

Commercial Construction Projects in 2018

Further to the paragraphs above, the following table shows a selection of currently ongoing projects in Lebanon. These include various of the sectors already mentioned (excluding industrial projects).

Project Name	Project Description	Companies Involved
New US embassy building	Multi-building compound located in the suburb of Awkar on a 43-acre site. Value: $1 bn	Morphosis, USA L. Harbert, USA Arup, USA Erga, Lebanon Nabco, Lebanon
Boulevard Heights, Beirut	Location Wardieh Gardens Lot 2272 Ras Beirut	Developer, Lebanon MEP Design, Lebanon Electrical Contractor, Lebanon
BANKMED Headquarters II, Beirut	3 interconnected office pavilions, from 9 to 19 storeys. Location: Mina El Hosn district	John Robertson Architects (JRA), UK General Construction &Contracting,Company – GENECO, Lebanon MEDPROPERTIES SEEDSa.r.l, Lebanon Barbanel Middle East S.A.L., Lebanon SETS, Lebanon
Collège Protestant Français	Extension of the “Collège Protestant Français” in Beirut, including the construction of a 7-level building housing classes + other amenities	ENTREPRISES A.R. HOURIE S.A., Lebanon Pierre Dammous & Partners, Lebanon Socotec Liban A.R.L., Lebanon URBI – Habib Debs Architecte, Lebanon Atelier Jad et Sami Tabet, France Présence Protestante Française au Liban (Collège Protestant Français), Lebanon
University of Balamand – Medical Center	Site Area: 40,000 m2 – Construction Area: 27,000 m2 Location: Balamand University in north Lebanon Value: $ 50mn	Builders Design Consultants (BDC), Lebanon UNIVERSAL HOSPITAL SERVICES, Lebanon University of Balamand, Lebanon
Tilal El Fanar	Gated community with 140-185 sqm apartments, 210- 300 sqm duplexes and 500sqm town houses on a 23,000 sqm area.	ZEROCK, Lebanon Injaz Holding, Lebanon
Centerfalls Mazraat Yachouh	Shopping Center and outlet mall BUA: 56 700 sq.m. Value: US$ 75mn Location: Mazraat Yachouh in Metn	DNA Design, Lebanon SMAG, Lebanon SIDCOM, Lebanon Alain R. Stephan Architects, Lebanon
City Development Beirut	Retail on Bas.1 & G F + 9 Fl. Offices , 5 Basement parking + 1 000 m2 Landscaping Location: Lot 1526 – Bachoura Value: US$ 45mn	Lebanese For Contracting, Lebanon Fouad Menem Consultant, Lebanon Delphes s.a.r.l., Lebanon AGEC, Lebanon

Conclusion

Lebanon has for many years been described as a paradox, and such a description can still be applied today. On the one hand, there is still the instability in the neighbouring countries, the residual political infighting from recent years, as well as the influx of the Syrian migrants all providing possible elements of volatility. On the other hand, Lebanon has emerged from the political crisis of November 2017. Additionally, there are other positives, such as the projects mentioned in the table above, as well as new infrastructure projects coming up. GDP is also still growing at a healthy rate. However, in the business surveys, most respondents are pessimistic about the near term.

It is obviously going to take more time for the predictions to translate in concrete raise in statistics. The wider economy of the country will have to contribute to attain this goal and that seems to be happening. It also appears to be the case that the situation in Syria is finally nearing a conclusion. Which way will things go? Ultimately, it appears that only time will truly tell which way the projections related to Lebanon’s construction field will go. For our part, we like to be optimistic, and say that things will go well.

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