22 Jun 2024
RIYADH: Saudi Arabia’s state-backed initiatives, including NEOM and Vision 2030, are driving growth in the construction sector, attracting substantial domestic and international investments, an analysis showed.
In its latest report, global consultancy firm Turner & Townsend highlighted that the construction activities are also driven by the Kingdom’s preparations for EXPO 2030 and the 2034 FIFA World Cup.
This comes as Saudi Arabia emerged as the leader in global construction activity for the first quarter, with the Kingdom having $1.5 trillion of projects in the pipeline, according to a report released earlier this month by real estate services firm JLL.
The JLL analysis further highlighted that the Kingdom accounted for a 39 percent share of the total construction projects in the Middle East and North Africa region, valued at $3.9 trillion.
“The stand-out story is the accelerated development of Saudi Arabia, where vast ambitions are being realized via projects like The Line, King Salman Park and Diriyah Gate,” said Mark Hamill, director and head of Middle East real estate and major programs, at Turner & Townsend.
The Line is a linear smart city currently under construction in Saudi Arabia’s $500-billion megacity NEOM, while King Salman Park is a 4102-acre large-scale public park and urban district which is being developed in Riyadh.
The report highlighted that despite political uncertainties, substantial investments are driving growth in the Gulf region as countries seek to diversify beyond traditional energy sources.
This occurs against the backdrop of Turner & Townsend ranking the Kingdom as the 19th most expensive country for construction globally, contrasting sharply with the US, which dominated the top 10 list.
The report further noted that construction cost inflation in Riyadh is easing from the highs of 7.0 percent seen in 2023, but is forecasted to remain high at 5.0 percent through 2024.
The analysis also highlighted Saudi Arabia’s efforts to attract global corporate occupiers through its Regional Headquarters Program.
It added: “This scheme encourages companies to launch offices in Saudi Arabia and there are cost advantages to office investment with an average high-rise central business district office in Riyadh costing a relatively low $2,266 per sq. m.”
The UK-based company also pointed out that Saudi Arabia is also facing a shortage of skilled labor which is crucial to materialize and fulfill construction activities as planned.
“Skilled labor shortages are also keeping costs elevated as Saudi Arabia suffers from a distinct shortage of skilled labor that is vital to deliver its most ambitious programs. The talent and resources needed for giga-projects in the country are also stretching overall supply chain capacity across the Middle East,” said the report.