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Eye of Riyadh
Business & Money | Monday 24 June, 2024 10:34 am |
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Knight Frank: Saudi Arabia’s construction awards hit US$ 142bn

Saudi Arabia is experiencing a significant surge in its construction activities, with the construction output value for the residential, institutional, infrastructure, industrial, energy & utilities and commercial sectors reaching US$ 141.5bn, up by 4.3% compared to last year, according to the latest analysis by global property consultancy Knight Frank’s Construction Landscape Review – H1 2024 report for Saudi Arabia. 

 

Mohamed Nabil – Regional Partner, Head of Project & Development Services, MENA, says: “We are currently witnessing a historical transformation unfolding in Saudi Arabia with construction projects standing out in their design scale and value. Given the scale of development pipeline, the government is hoping to attract over US$ 3 trillion in investments by 2030, a figure recently confirmed the Minister of investment during the inaugural Sino-Gulf Cooperation for Industries and Investments Forum in China last month.” 

 

This substantial investment in transforming the Kingdom is at the heart of Vision 2030 and will also strengthen the Kingdom’s position as a global hub for tourism, commerce and trade.

 

Knight Frank says that since the launch of Saudi Arabia’s National Transformation Plan in 2016, the total budgeted value of real estate and infrastructure projects has surpassed US$ 1.25 trillion. This transformation is evident across the entire urban landscape, driven by Vision 2030, which aims to deliver over 660,000 residential units, more than 320,000 hotel keys, over 5.3 million sqm of retail space, and more than 6.1 million sqm of new office space by the end of the decade.

 

Nabil continued, “Notably, 38% of the existing contract award value accounts for Riyadh Province, equating to US$ 54bn, followed by Mecca and Tabuk Provinces at US$ 28.7bn and US$ 28.5bn, respectively. While construction sector contract awards account for 61% of the total value, the transportation sector follows in second place at 33%, highlighting the significant investment being made in bolstering the capital’s transportation infrastructure as the population swells to a projected 10 million by 2030.” 

 

The residential sector primarily dominates Saudi Arabia's construction output value, accounting for 31% (US$ 43.5bn) of the total output value in 2023 and projected to reach US$ 56.9bn by 2028, according to Knight Frank’s analysis. The energy and utilities sector follows closely in second place, with a value of US$ 35.1bn, which is forecast to increase to US$ 46.5bn by 2028.

 

By the end of 2028, the Kingdom’s construction output value for all sectors is forecast to reach US$ 181.5bn, making Saudi Arabia the largest world’s largest construction market, according to Knight Frank.

 

Residential construction cost benchmark

 

Knight Frank has also published an analysis of residential construction costs across Saudi Arabia which outlines the range of building construction and fixed fit-out costs across different residential categories, including different tiers of villas, and the same for apartment buildings. 

 

Having analysed construction rates per square metre for various residential projects in Kingdom, Knight Frank’s data reveals that the variance in construction costs is primarily attributed to the unique differences in the scale, quality and type of construction projects, ranging from SAR 3800-10,000 psm. Using the lower end of this range as well as the data on average dwelling size, Knight Frank’s analysis suggests that the cost to deliver the Kingdom’s planned 660,000 homes by 2030 will cost at least US$ 175bn.

 

Giga Projects 

 

By far the most visible impact of Vision 2030 has been the emergence of new super-cities, mainly Giga projects around the Kingdom, particularly in the Western part of the country. 

 

Amar Hussain - Associate Partner, Research, ME, added: “With a value of over SAR 1.25 trillion launched but not yet delivered, Giga Projects are undoubtedly transforming the Kingdom's urban landscape. Arguably one of, if not the most expansive, real estate development programs ever seen in the world is gathering pace in Saudi Arabia as the 2030 deadline nears to realise Vision 2030. 

 

“Nationally, the planned volume of residential units has risen to 660,000 units, an increase of 30% in the last 12 months. Meanwhile, the office pipeline is steady at 6 million square meters. In the commercial market, plans are currently underway for 5.3 million square meters of retail space and an additional 320,000 hotel rooms, which will contribute to Saudi Arabia's objective of growing the population to 40 million and accommodating 150 million visitors by 2030. This figure has increased from approximately 106 million visitors last year, including 27 million international visitors, a 62% increase from the previous year”.

 

According to Knight Frank's analysis, there are currently 25 Giga projects that are at various phases of construction around the Kingdom, with Western Saudi Arabia remain a focus of development with plans valued at US$ 692 billion, accounting for 55% of the total US$ 1.25 trillion development plan. The region is expected to see extensive growth in luxury residential supply and hotel accommodation, as well as retail, and office space.

 

-ENDS-

 

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