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Dubai HVAC Market

Outlook

Published by BNC for The Big 5 Dubai

Publication Date: August, 2017
© 2004-2017 Industry Networks (FZC). All rights reserved.
 Executive Summary
The heating, ventilation, and air-conditioning (“HVAC”)
market in Dubai has been steadily growing over the past few
years due to the high volume of construction activities in the
city. The growth in Dubai’s urban construction market is
proportional to the demand for HVAC equipment and
systems as it is part of a construction package that comprises
of civil, mechanical, electrical and plumbing (MEP) works. The
city’s growing population and tourism, hosting the Dubai
Expo 2020 and launching sustainable city initiatives continue
to drive construction activities, which in turn, is fueling the
demand for HVAC services. Moreover, the warm regional
climate leads to high energy consumption and creates the
need for high-efficiency units. Advancements in cooling
system technology are reducing building maintenance costs
and provide green energy solutions that comply with Dubai’s
construction standards.
This intelligence report offers an overview of the HVAC market
in Dubai by first studying the stage-wise construction activities
and the main project types to understand the growth
potential and drivers for HVAC equipment and systems. It
then looks in depth at the HVAC technologies and market size
and lists some of the key projects and trends that are shaping
the market.
Construction Overview
The UAE construction market is one of the most active
markets in the GCC with a large number of high-value
projects spread across different sectors. As per the BNC
Project Intelligence, there is approximately USD 774 billion
worth of active project investments in the country, of which
approximately 43% are concentrated in Dubai. The
construction market serves as a catalyst for economic growth
and diversity through the buildup and improvements of a
city’s infrastructure to create an efficient operating
environment for facilitating business activities.¹
The UAE government has outlined a seven-point plan under
Vision 2021 aimed at addressing the social and economic
goals of the country.² Infrastructure is one of the main pillars
supporting the national agenda by developing world-class
facilities, such as new roads, airports and telecommunication
networks, to support the local economy.³ As per the BNC
Project Intelligence, Dubai has approximately 4,332 active
projects, the majority of which are concentrated in the urban
construction sector comprising of various project types such
as residential and commercial buildings, hospitals, and hotels.
1-4 Market Research, Media
The highlights of this report are as follows:
▪ Dubai maintains a highly active portfolio of
construction projects, which have been driving the
demand for HVAC products.
▪ Commercial and residential buildings constitute
almost 70% of the total number of projects with
HVAC applications in Dubai.
▪ There is an estimated USD 59 billion worth of project
investments in Dubai with HVAC applications in the
early stages of construction indicating a steady flow-
through of funding to generate new demand in the future.
▪ The total estimated HVAC spend on construction
projects in Dubai is approximately USD 1.5 billion
and is growing in line with the values of contracts
awarded in the urban construction sector.
▪ Dubai Government has enforced building
specifications and smart city initiatives, which promote
efficient energy units.
▪ Energy efficient cooling technologies require less
power consumption and translate into direct cost
savings on maintenance and utility bills while
improving the overall environmental footprint. The
shift towards energy efficient cooling technologies is
gaining importance in the secondary market as more
residential and commercial properties begin switching to
district cooling systems.
Chart 1: Total Estimated Value (in Billion USD) of
Active Projects by Sector in the UAE
32.2
51.9
85.9
87.6
516
Industrial Oil & Gas Transport
Urban Construction Utilities
Ambitious urban planning initiatives such as the Dubai Urban
Development Master Plan 2020 are a mechanism for realizing
the goals outlined in the UAE 2021 National Agenda.⁴
2
The primary demand drivers for Dubai’s construction activities DUBAI EXPO 2020 – DEMAND DRIVER #3
include the growth in population, the rise in tourism, the Dubai is building a world-class site to host the Dubai Expo
2020. The construction plans for hosting the event fits into the
Chart 2: Total Estimated Number and Values of
urban development master plan of the Dubai South, which is
Active Projects by City in the UAE
a 145 square-kilometer urban area located in Jebel Ali.¹² The
400 5,000 expected rise in passenger traffic for the event is also
Est. Value in USD Billion

4,500
350 335 4,332 327.7
4,000
supporting airport expansion projects, while the projected

# of Projects
300
3,500 growth in overnight visitors is expected to support the high
250 3,000
200 2,500
number of active hospitality projects in the city.
2,220 1,996
150 2,000
1,500
100 894
655 1,000
50 399
29.4 27.4
363
500
Chart 3: Total Estimated Number and Values of
29.4 13.4
11.5
0 - Active Projects by Sector in Dubai
Dubai Abu Dhabi Ras Al Ajman Sharjah Fujairah Umm Al
Khaimah Quwain
300 4,000
Estimated project value (in Billion USD) # of Projects 265.8
3,522 3,500
250

Est. Value in USD Billion

3,000

# of Projects
200
2,500
Dubai Expo 2020, and smart and sustainable urban planning. 150 2,000
These drivers will continue to support an active construction 1,500
100
market, resulting in a high application of efficient cooling 1,000
technologies such as district cooling and chiller systems. 50 33.5
24.9 236 376 500
191 6.4 4.3 7
0 0
POPULATION – DEMAND DRIVER #1 Urban Transport Utilities Industrial Oil & Gas
Construction
The population of Dubai has been growing at an exponential
Estimated project value (in Billion USD) # of Projects
rate. According to the Dubai Statistics Center, the city has
registered 2.8 million people as of June 2017.⁵ The number of
residents is expected reach 3.4 million people by 2020⁶ and
5.2 million people by 2030.⁷ Moving to Dubai has many
advantages, including a high quality of living and job SMART & SUSTAINABLE URBAN PLANNING
opportunities. The Dubai Expo 2020 alone is expected to add – DEMAND DRIVER #4
300,000 new jobs notably in areas of hospitality and Dubai Government has set in motion an ambitious plan on
construction which are boosting the local GDP.⁸ becoming a leading smart city by 2021. Dubai was the first city
in the world to assess the efficiency of municipality operations
TOURISM – DEMAND DRIVER #2 and their interactions with the community under an initiative
Dubai is one of the fastest growing destinations for overnight led by His Highness Sheikh Mohammed Bin Rashid Al
travelers. The steady rise in tourism activities is driving the Maktoum, Vice-President and Prime Minister of the UAE and
demand for many construction projects, notably in the Ruler of Dubai.¹³ Smart City initiatives focus on addressing the
transport, hospitality, and retail sectors.⁹ Dubai ranks among challenges of a growing urban population such as traffic
the top global destinations worldwide, with an impressive 14.9 congestion and pollution through the buildup of Dubai’s
million overnight visitors registered in 2016 and is on track to transport network and sustainable communities. These
reach 20 million by 2020.¹⁰ The Dubai Expo 2020 alone is initiatives tie into the Dubai Plan 2021 which aims to create a
expected to attract 25 million visitors, 70% of whom are world-class city through empowering themes such as smart
anticipated to come from abroad.¹¹ and sustainable living.

HVAC Market Analysis

The HVAC market can be divided into six categories based on Dubai is approximately 3.3 million tons of refrigeration (TR).¹⁴
their cooling technologies, which are district cooling, central Among the various cooling technologies, ducted split
cooling (air cooled), central cooling (water cooled), variable system/packaged units and central cooling systems constitute
refrigerant flow, ducted split/packaged units, and split more than half of the total cooling tonnage in the city. Split
units/window AC. According to a recent cooling study by the air conditioning systems have a high applicability in the
Regulation and Supervision Bureau (RSB) for Electricity & residential buildings.¹⁵ There are also high-efficiency filtrations
Water, Dubai, the total estimated load of cooling systems in in these technologies that are ideal for various commercial

5-15 Media, Government of Dubai, Expo 2020 Dubai 3

applications¹⁶ in addition to hotels, schools, municipal and notable players in Dubai are Emicool, Empower,
industrial facilities.¹⁷ The following chart summarizes the load Tabreed and Emaar.
distribution for each category.
Central cooling systems are among the most widely used
Chart 4: Total Load Distribution by Cooling cooling technologies in residential, hospitality or commercial
Technology in Dubai projects with air flowing from a central cooling unit located on
the property. This system has been traditionally used in
development projects and is still common in areas where there
608,838 , 585,676 , are no district cooling plants. However, among these
18% 18% technologies, district cooling is gaining popularity, especially
238,241 ,
7% in new developments.¹⁸ District cooling operators recognize
that more developers and project owners are converting from
conventional chilling methods to district cooling.¹⁹ Emicool,
989,362 ,
30% 833,844 , one of the leading players in the UAE, is expected to have a
25% market share of 20% by 2021, targeting much of its capacity
expansion in Dubai Investment Park.²⁰ Unlike district cooling
52,942 , systems, which are powered by UAE-based companies such
2% as Emicool, Empower, Tabreed and Emaar, the other cooling
District Cooling Central Cooling – Water Cooled technologies are supplied by major international players such
Central Cooling – Air Cooled Variable Refrigerant Flow
as Lennox, Trane, Goodman. Johnson Controls, Fujitsu, and
Hitachi.
Ducted Split /Packaged Units Split Units/Window AC

District cooling offers several benefits including:

▪ The adoption of green technology through a simple
water cooling system which is less hazardous to the
environment.
Cooling technologies will vary based on their load capacity
▪ Better space management which is enabling developers
and can range from small residential or commercial units to
to utilize the space dedicated to the central cooling unit.
large-scale building projects. The description of each cooling
▪ Cost effective in areas with a high concentration of
technology is as follows:
buildings since the minimal pipeline is required to
▪ is when a large compressor
connect these buildings with the cooling plant.
unit is placed outside of the building to drive the
▪ District cooling plants are capital intensive since they
airflow and internal cooling process. An indoor coil
need sufficient capacity for providing cooling energy to
filled with a refrigerant (air/water) is distributed
a nearby area or community. However, industry
throughout the building via air ducts. This technology is
sources suggest that new technologies in district
designed to cool an entire house or building.
cooling are currently underway to develop smaller
▪ uses refrigerate
district cooling plants that can service small-scale project.
piping to run cool air from outdoor units to the rest of
the building. VRF units operate at the desired cooling
Larger urban construction projects are currently generating a
rate and speed allowing for substantial energy savings.
high demand for heating, ventilation, and cooling in district
The local distributors in Dubai for this type of
energy systems. Some of the major urban construction projects
technology include Royal Cool and NIA Limited.
under construction in Dubai include the Dubai Hills, the Royal
▪ is when air passes from an
Atlantis Resort, and Residence, iSuites, Fountain View Towers
indoor unit by a duct to one or more air ventilation
and Dubai Creek & Harbor. Dubai has been progressively
systems. A thermostat control conveniently adjusts the
seeing a high application of HVAC equipment and systems in
room temperature or auto settings. Some of the major
new construction projects. The growing demand for HVAC
international players operating in Dubai include
products is mainly attributable to several project types, notably
Lennox, Trane, and Goodman.
those related to residential and commercial buildings and
▪ allows the exterior heat to be
hospitality.
converted into the cool air through a window unit and
is typically used for cooling a single room. This
The following analysis is based on BNC Project Intelligence:
technology is common in villas and low-rise buildings.
▪ There are seven major project types supporting the
▪ is a modified version of the
growth of the HVAC market, and represent
central cooling system and can provide a high volume
approximately 80% of all project values with HVAC
of cooling energy from a central cooling plant. The
applications. These project types are buildings,

16-20 Trane, Daikin, Media 4

 Chart 5: Total Estimated Number and Values of The following analysis is based on BNC Project Intelligence:
Active Projects by Project Type with ▪ There are an estimated 3,877 active construction
HVAC Applications in Dubai projects driving the demand for HVAC equipment and
140 3,000
systems in Dubai and constitute approximately 90% of
118.9
2,685 all active projects in different stages of development
Est. Value in USD Billion

120 2,500
100 (i.e. concept, design, tender, under construction and on

# of Projects
2,000
80 hold). The total estimated value of construction projects
1,500
60 49.2 with HVAC applications is USD 237 billion and makes
43.9
1,000 up over 70% of all project values in the city.
40
579
20 369 9.4 4.8
500 ▪ Despite some market slowdown, approximately 70% of
96 5.1 2.1
21 44 3.9 6 77
0 - all active project values are still advancing, the majority
Buildings Hospitality Retail Leisure & Healthcare Aviation Education Others
Facilities Recreation
Facilities
of which are currently under construction.
▪ There is an estimated USD 74 billion worth of projects
Estimated project value (in Billion USD) # of Projects
in the initial stages of development (i.e. concept,
design, and tender) indicating a steady flow-through of

hospitality, retail facilities, leisure and recreation Chart 6: Total Estimated Number and Values of
facilities, healthcare, aviation, and education. Active Projects by Construction Lifecycle
▪ The remaining 20% of the project values comprise of Stage with HVAC Applications in Dubai
project types that are either less frequent or have
100 93.9 3000
minimal requirements for HVAC systems. These 90
Est. Value in USD Billion

2558 2500
projects include plants, rail stations, oil and gas 80 70.3
70
processing facilities, stadium, theme park and Water

# of Projects
2000
60
Park, zoo and animal reserve, sports club and facilities. 50 1500
These projects are referred to ‘others’ in the graph. 40 33.7
30 25.1 1000
▪ The majority of construction projects are concentrated 20
733
14.4
500
in low-rise, mid-rise, and high-rise commercial and 10 130 268
188
residential properties. 0 0
Under On Hold Concept Design Tender
▪ Dubai has one of the most diversified economies in the Construction
GCC. The city is a strategic business and tourist hub, Estimated project value (in Billion USD) # of Projects
with business-friendly free zones, entertainment
venues, and luxury hotels. The value of active
hospitality and retail projects constitutes over 22% of all
project values corresponding to the HVAC market.

The HVAC market will continue to improve in the near future new project investments that are expected to begin
as work is expected to resume on some of the on hold projects, construction work in the near future. It is also
however market growth will be slower than anticipated due to noteworthy to mention that 21 of the projects under
the high number of construction projects that have been concept or design are worth USD 1 billion or more and
temporarily suspended or put on hold. have a combined estimated value of USD 33 billion.

HVAC Market Size and Outlook

The market for HVAC equipment and systems has been applications are categorized under “other” which constitute a
growing due to the high volume of active construction projects smaller share of the total spend on HVAC services).
in Dubai. However, the ratio of HVAC cost to the total project
cost varies by the project types. The following chart lists the The following analysis is based on BNC Project Intelligence:
project types with full HVAC applications (those with limited

5
 Chart 7: Total Estimated Spend on HVAC Equipment The following analysis is based on BNC Project Intelligence:
and Systems Per Project Type in Dubai ▪ The values of urban construction and MEP contracts
1,200
awarded are proportional to each other (HVAC services
1,037.9 constitute a high percentage of MEP costs). As a result,
Est. Value in USD Billion

1,000
a temporary reduction in the value of urban
800
construction projects awarded will directly impact the
600
demand for HVAC services.
400 ▪ The HVAC market in Dubai is estimated at USD 1.3
251.5
200 billion by the end of 2017 and is projected to grow by
66.6 36.8 31.7 41.9
26.6
0
11.9 6.2 10% over the next two years. This forecast is based on
Buildings Hospitality Retail
Facilities
Aviation Education Leisure &
Recreation
Healthcare Manfacturing
/ Processing
Others
a five-year moving average to determine the year-on-
Facilities Facilities
year values of awarded projects in Dubai’s urban
construction sector.

▪ The buildings segment has the highest value of

Chart 8: Growth Forecast of HVAC Market Values
construction projects with HVAC applications,
Awarded in Dubai
constituting nearly 70% of all construction projects with
2,000 10%
HVAC applications in Dubai. 1,511.1 1,449.3
1,367.2
▪ The high volume of building projects is primarily due to Est. Value in USD Million 1,500 1,314.7 6%
5%

Growth Rate (Y-O-Y)

4%
the growth in Dubai’s population which is also 1,000
1%
0%
supporting construction activities in other project types
500
such as education, leisure, and recreation facilities and -5%
0
healthcare. 2016 2017e* 2018f* 2019f*
▪ The total estimated spend on HVAC equipment and -500
-10%

-13%
systems associated with hospitality and retail projects -1,000 -15%
constitute over 20% of all HVAC project investments in Spend on HVAC (in Million USD) Growth rate (Y-O-Y)
Dubai. The high contribution of HVAC applications in
these two industries is primarily due to a highly active
tourism sector, offering entertainment venues, luxury
hotels and unique attractions that bring visitors from ▪ Among the urban construction projects advancing in
around the world. different stages of development, there are
▪ Airport building terminals, shopping malls have vast approximately 2,258 projects currently under
interior spaces requiring ventilation and cooling and construction, which may create a temporary shortage
typically result in a high application of HVAC services of active projects in the market once these projects are
delivered in multiple packages or systems. One of the complete.
notable airport projects currently underway is the
construction of a Passenger Terminal Building in Al
Maktoum International Airport (USD 1.5 billion).

HVAC Market Trend

Dubai Government has put in place a series of initiatives to ▪ Thermal comfort through upper limit and lower limit
become the leading smart city in the region by efficiently ranges;
managing its assets, such as ICT infrastructure and energy ▪ Minimum energy efficiency requirements and test
management systems.²¹ Media sources report that smart HVAC procedures; and,
products will eventually become part of the “Internet of Things” ▪ Monitoring system and ozone depletion potential
(IoT) through intelligently controlled features, which include (ODP) material management, including refrigerants
wireless, remote and programmed controls.²² Dubai’s green with zero ODP or with global warming potential.²³
building regulations outline the minimum specifications for
installing and maintaining HVAC equipment and systems, Dubai’s green building standards aim to promote a pollution
including: free environment through smart energy solutions on all new
▪ Minimum ventilation for adequate air quality; construction projects.²⁴ Advancements in technology are
▪ Frequency of inspection and cleaning of HVAC equipment; improving the efficiency of HVAC products by reducing the

21-24 Media, Government of Dubai, 6

amount of energy (or heat content) for evaporative cooling to
work and thus decreasing electricity costs.²⁵ Smart building
projects, such as the Mohamad Bin Rashid City and Dubai
Sustainable City are expected to generate a high volume of
demand for energy efficient HVAC products.²⁶
Dubai is among the leading cities in the region to adopt smart
building solutions which promote energy efficient cooling
technologies. Media sources highlight that in a relatively recent
report published by Siemens, a leading global technology firm,
smart energy solutions can reduce energy consumption by
40% in residential and commercial buildings.²⁷ Since air
conditioning use accounts for approximately 70% of all
Conclusion
The HVAC market in Dubai has been growing at a steady pace
due to the high volume of construction projects in the city. As
per the BNC Project Intelligence, Dubai has approximately
3,877 active projects with HVAC applications. There is a large
volume of construction activities surrounding the urban
construction sector notably in commercial and residential
properties. The steady rise in new urban construction projects
awarded should provide the initial impetus to grow the HVAC
For more construction intelligence contact
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contactus@bncnetwork.net
or visit www.bncnetwork.net
25-29 Media
electricity demand in the region during the summer, the impact
of energy efficient cooling technologies is expected to provide
a significant reduction in building maintenance and utility costs.
According to Koen Bogers, Senior Executive Vice President of
the Building Technologies Division of Siemens Middle East,
Dubai’s Wafi Mall was able to realize a 30% saving on utility
costs in its first year of opening, with a two-and-a-half year
payback period by implementing the company’s Demand Flow
solutions.²⁹ Digital technology applications in modern cooling
systems have a clear cost advantage over traditional cooling
systems. As a result, manufacturers and suppliers are offering
a variety of advanced product solutions to meet local demand,
including cooling systems that use alternative energy sources.
market, and as a result, the outlook for the HVAC market
appears to remain positive over the next few years. Dubai has
adopted a series of green building standards and smart city
initiatives calling for energy efficient solutions, which are
shaping the course of the local HVAC market. Advancements
in technology will improve the operating efficiency of these
systems leading to a reduction in the cost of energy and
carbon footprint.
7