RIYADH: Saudi Arabia’s Ambitious Projects Propel Construction Sector Growth
Saudi Arabia’s state-backed initiatives, such as NEOM and Vision 2030, are driving substantial growth in the construction sector, attracting both domestic and international investment, according to a recent analysis.
The latest report from global consultancy firm Turner & Townsend highlights that the Kingdom’s construction boom is also fueled by preparations for EXPO 2030 and the 2034 FIFA World Cup.
Saudi Arabia emerged as a leader in global construction activity for the first quarter of the year, with a staggering $1.5 trillion in projects in the pipeline, as noted in a recent JLL report. The analysis reveals that Saudi Arabia holds a 39 percent share of the total construction projects in the Middle East and North Africa (MENA) region, which is valued at $3.9 trillion.
Mark Hamill, Director and Head of Middle East Real Estate and Major Programs at Turner & Townsend, commented, “The standout story is Saudi Arabia’s accelerated development, with ambitious projects like The Line, King Salman Park, and Diriyah Gate coming to fruition.”
The Line, a linear smart city under development in the $500 billion NEOM megacity, and King Salman Park, a vast 4,102-acre urban district in Riyadh, are examples of the Kingdom’s bold initiatives.
Despite political uncertainties, the report notes that substantial investments are driving growth in the Gulf region, as nations seek to diversify beyond traditional energy sources. Turner & Townsend also points out that Saudi Arabia is ranked as the 19th most expensive country for construction globally, in contrast to the US, which dominates the top 10 list.
The report further indicates that while construction cost inflation in Riyadh has eased from 7.0 percent in 2023, it is expected to remain high at 5.0 percent through 2024. Saudi Arabia is also working to attract global corporate occupiers through its Regional Headquarters Program, offering cost advantages such as an average high-rise office cost of $2,266 per square meter in Riyadh.
However, the shortage of skilled labor poses a significant challenge, affecting both construction costs and project timelines. “Skilled labor shortages are keeping costs elevated and straining overall supply chain capacity across the Middle East,” the report states.
Regional Insights
In the MENA region, Doha is the second most expensive market at $2,096 per square meter. However, construction cost inflation in Qatar is expected to decrease from 3.5 percent in 2023 to 2.5 percent in 2024.
Dubai, with an average construction cost of $1,874 per square meter, benefits from high tourism activity and residential development. “Dubai’s relatively low cost of construction compared to Western markets continues to make it an attractive location for building hubs and amenities for international visitors,” the report notes.
Abu Dhabi is the fourth most expensive market in the Middle East at $1,844.2 per square meter. Hamill highlighted opportunities in the UAE and Qatar as inflation rates cool but emphasized the need for clients to adapt procurement and contracting models to mitigate supply chain disruptions.
Global Outlook
Globally, construction pipelines are expected to grow this year, though labor shortages remain a major concern. “The global real estate market is emerging from a challenging period of inflation and disruption. Our sector has shown resilience, and a focus on new procurement and supply chain approaches is creating opportunities across many markets,” said Neil Bullen, Managing Director of Global Real Estate at Turner & Townsend.
The US continues to dominate the list of the most expensive places to build, with New York leading at $5,723 per square meter, followed by San Francisco at $5,489. Zurich and Geneva also feature prominently in the top rankings.
The report emphasizes that embracing technology in the construction sector could help address industry challenges. “Accelerating digitalization presents a significant opportunity, but it requires keeping pace with the demand for skilled labor. Persistent shortages could constrain potential growth,” Bullen added.
As interest rate cuts become more likely and investor appetite increases, construction capacity may face additional tests.
