RIYADH: Despite macroeconomic conditions impacting the sector globally, the construction industry in the Kingdom continues to lead the Middle East and North African region, said a recent report.
Demonstrating its commitment to driving economic diversification and transforming the Kingdom in line with its Vision 2030, the Kingdom witnessed the highest value of project awards in 2022, according to JLL’s Q4 2022 KSA Construction Market Intelligence Report.
Construction output growth in Saudi Arabia is anticipated to rise by 3.2 percent in 2022, with a further annual average growth rate of 4 percent between 2023 to 2026 as indicated by Global Data.
Not surprisingly, the Kingdom has maintained its position as the strongest market across the MENA region with the highest total value of project awards for four consecutive years.
As of October 2022, the Kingdom holds a 35 percent market share with a recorded $31 billion worth of contract awards against an overall MENA total of $87 billion as tracked by MEED Projects.
Saudi Arabia’s pipeline value of unawarded (pre-execution) projects is estimated at $1.1 trillion, which includes projects from the study stage through to the main contractor bid. Approximately 70 percent comprise ‘construction’ sector projects with residential, cultural, leisure and hospitality as sub-sector leaders, which is the driving force behind the Vision 2030 strategy.
In the second half of 2022, 13,000 hotel keys are expected to be delivered in Riyadh, Jeddah, and Makkah, accentuating the continuation of the Kingdom’s hospitality sector development.
The top 10 contractors in the Kingdom are responsible for $400 billion in projects that are currently in the execution stage, accounting for 40 percent of the total future pipeline value of $1.1 trillion.
According to MEED Projects, the total value of projects awarded in the Kingdom between 2021 and 2025 will reach $569 billion, with a total of $85 billion (15 percent) awarded to date across 2021 and 2022 (October end).
JLL’s market intelligence data further revealed that global economic volatility in the first two quarters of 2022 created challenges in the local construction market in terms of delivery lead times and instant price increases, with suppliers reluctant to guarantee prices for extended periods of time.
“Given the volatile market conditions and rising construction material prices, which reached a significant peak during the second quarter of this year, there is a need for robust mitigation strategies,” said Laura Morgan, market intelligence lead MEA at JLL.
She added: “Moving forward, the construction sector will prioritize development needs that are aligned with evolving trends and demands, with an emphasis on innovation and digitization playing a significant role within the segment and in powering Vision 2030 projects.”