‘Historical transformation’ in Saudi Arabia to drive construction output to $181.5bn: Knight Frank

‘Historical transformation’ in Saudi Arabia to drive construction output to $181.5bn: Knight Frank
Saudi Arabia’s is aiming to deliver over 660,000 residential units and more than 320,000 hotel keys by the end of the decade. Shutterstock
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Updated 24 June 2024

‘Historical transformation’ in Saudi Arabia to drive construction output to $181.5bn: Knight Frank

‘Historical transformation’ in Saudi Arabia to drive construction output to $181.5bn: Knight Frank

RIYADH: Saudi Arabia’s construction output value is projected to hit $181.5 billion by the end of 2028 — a 28 percent rise over five years, according to global property consultancy Knight Frank,

An analysis by the firm found that output value for the sector reached $141.5 billion in 2023 thanks to the Kingdom’s activities in the residential, institutional, and infrastructure sectors as well as industrial, energy, utilities, and commercial divisions.

This substantial investment in construction also serves to strengthen the Kingdom’s position as a global hub for tourism, commerce and trade.

This is further propelled by Saudi Arabia’s giga-projects – including the $500-billion-megacity NEOM – and goals to deliver over 660,000 residential units, more than 320,000 hotel keys, over 5.3 million sq. m. of retail space, and more than 6.1 million sq. m. of new office space by the end of the decade.

Mohamed Nabil, head of Project and Development Services for the Middle East and North Africa at Knight Frank, said: “We are currently witnessing a historical transformation unfolding in Saudi Arabia with construction projects standing out in their design scale and value.”

He added: “Given the scale of the development pipeline, the government is hoping to attract over $3 trillion in investments by 2030, a figure recently confirmed by the Minister of Investment during the inaugural Sino-Gulf Cooperation for Industries and Investments Forum in China last month.”

Since the launch of Saudi Arabia’s National Transformation Plan in 2016, deemed an integral part of Vision 2030,  the total budgeted value of real estate and infrastructure projects has surpassed $1.25 trillion. 

While this transformation is evident across the entire urban landscape, the residential division primarily dominates the sector’s output value, accounting for 31 percent, or $43.5 billion, of the total in 2023. 

This is projected to reach $56.9 billion by the end of 2028, according to Knight Frank’s analysis.

This continued growth is largely driven by the nation’s flagship real estate developer, ROSHN, which aims to produce over 400,000 homes, 1,000 kindergartens and schools, and over 700 mosques by 2030. 

The company has made strides to fulfill this goal, most recently in April, when it signed an SR215 million ($57.3 million) sale and purchase agreement with partner developer Dar Al Arkan.

Under the deal, Dar Al Arkan will acquire and develop residential villas in SEDRA 1A, which is in northern Riyadh.

Riyadh currently accounts for 38 percent of the existing contract award value, equating to $54 billion, followed by Makkah at $28.7 billion and Tabuk province at $28.5 billion.

While construction sector contract awards account for 61 percent of the total value, the transportation sphere follows in second place at 33 percent, highlighting the significant investment being made in bolstering the capital’s  infrastructure as the population swells to a projected 10 million by 2030.

The under-construction Riyadh-based King Salman International Airport is a testament to this fact. According to the Public Investment Fund, the project, announced by Crown Prince Mohammed bin Salman in November 2022, is expected to cover an area of approximately 57 sq. km, allowing six parallel runways as well as the existing terminals.

The Knight Frank analysis comes as Saudi Arabia emerged as the leader in global construction activity for the first quarter of this year,  according to a report released in May by real estate services firm JLL, which calculated the Kingdom having $1.5 trillion of projects in the pipeline,

The JLL analysis further highlighted that Saudi Arabia 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 economic diversification strategy Vision 2030 has been the driving force for much of this growth, especially through giga-projects across the Kingdom, particularly in the Western region.

Initiatives like NEOM, The Line, Diriyah Gate, and the newly announced Qiddiyah project are at the forefront of this boom.

Amar Hussain, associate partner for research at Knight Frank, said: “With a value of over SR1.25 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 realize Vision 2030.” 

He added that across the Kingdom the planned volume of residential units has risen to 660,000, an increase of 30 percent in the last 12 months, while the office pipeline is steady at 6 million sq. m.

In the commercial market, according to the report, plans are currently underway for 5.3 million sq. m. 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 percent increase from the previous year,” said Hussain.

According to Knight Frank’s analysis, 25 giga-project-related developments are currently in various construction phases around the Kingdom. 

Western Saudi Arabia remains a focus of development, with plans valued at $692 billion, accounting for 55 percent of the total $1.25 trillion expansion plan. 

The region is expected to see extensive growth in luxury residential supply, hotel accommodation, retail, and office space.

This past year alone, under the umbrella of NEOM, a multitude of new assets were announced in the Western region, including luxury lifestyle destination Magna, situated on the Aqaba coastline, ultra-modern active lifestyle community Norlana, and eco-luxury sanctuary resort Zardun.

Alandalus Property commences $222m commercial center in Makkah

Alandalus Property commences $222m commercial center in Makkah
Updated 17 sec ago

Alandalus Property commences $222m commercial center in Makkah

Alandalus Property commences $222m commercial center in Makkah

RIYADH: Saudi holy city Makkah is set to see a boost in its commercial infrastructure with Alandalus Property Co. commencing construction on an SR831 million ($222 million) project. 

In a statement to Tadawul, the Saudi-based real estate firm announced the start of work on a new commercial center in the Makkah Al-Mukarramah region, spanning over 50,650 sq. m. 

The center is designed to include 350 rental units, such as showrooms, retail spaces, hypermarkets, entertainment areas, and dining options. It will also feature parking facilities for 1,800 vehicles. 

Alandalus’ move underscores its commitment to enhancing Makkah’s commercial capabilities. This project follows recent expansions by UAE-based Lulu Group, which launched two new projects in Makkah and Madinah earlier this year. 

“According to the developer’s report, the optimal final engineering design for the project was chosen from a group of designs prepared by the most skilled engineering offices in the Kingdom,” said Alandalus in the Tadawul statement.  

It added that construction is underway with all necessary municipal permits secured, and the center is expected to be completed in the first quarter of 2027. 

The project is being developed by Masat Property Co., a joint venture between Alandalus and Buroj International, with Hamat Holding Co., in which Alandalus holds a 25 percent stake, overseeing construction. 

Funding for the project will be primarily sourced from bank loans, with supplementary contributions from the partners’ own resources. 

The ongoing development projects are set to significantly enhance infrastructure in Makkah and Madinah, supporting their transformation into leading hubs for business and tourism. 

In December 2022, the Makkah Chamber of Commerce, Madinah Chamber of Commerce, and the Islamic Chamber of Commerce, Industry, and Agriculture signed the Manafea agreement, aimed at transforming these holy cities into pivotal financial and business hubs in the Islamic world. 

In a separate update, Alandalus reported a 67 percent decline in net profit for the first quarter of 2024, falling to SR4.7 million compared to the same period last year.  

The drop was attributed to higher financing costs and increased expenses in the hospitality and office sectors.  

It added that consolidated revenue also decreased by 2.70 percent year-on-year to SR53 million, driven by a 6 percent decline in the retail and operations segment. 

Saudi-China financial markets enter new era with ETFs listed on Chinese bourses: PIF 

Saudi-China financial markets enter new era with ETFs listed on Chinese bourses: PIF 
Updated 26 min 2 sec ago

Saudi-China financial markets enter new era with ETFs listed on Chinese bourses: PIF 

Saudi-China financial markets enter new era with ETFs listed on Chinese bourses: PIF 

RIYADH: Saudi Arabia and China’s financial markets will see a new chapter of connectivity with the recent launch of exchange-traded funds on Chinese bourses, according to Public Investment Fund Governor Yasir Al-Rumayyan. 

At the listing event in Shenzhen, Al-Rumayyan stressed that the ETF gives investors in Asia access to the Saudi equity market and its sustainable long-term growth driven by strategic economic transformation. 

Last week, two new ETFs focused on the Kingdom’s stocks debuted in Shanghai and Shenzhen. The feeder funds, operating under the Qualified Domestic Institutional Investor program, began trading on July 16, with both briefly hitting the 10 percent daily limit on their launch day. 

The first fund, CSOP Saudi Arabia ETF QDII, managed by China Southern Asset Management, is listed on the Shenzhen Stock Exchange after raising 634 million Chinese yuan ($87 million).  

The second fund, the Huatai-PineBridge managed CSOP Saudi Arabia ETF QDII, started trading on the Shanghai Stock Exchange after raising 590 million Chinese yuan. 

These new ETFs are among the first batch of funds in China able to invest in the Saudi Arabia stock market. 

PIF aims to attract foreign investors and deepen capital inflows into Saudi Arabia, continuing from the success of the CSOP Saudi Arabia ETF introduced on the Hong Kong Stock Exchange in November 2023. This fund, launched with an initial investment of over $1 billion, including a $500 million contribution from PIF, became the world's largest Saudi Arabian ETF. 

Saudi Arabia launches competition for 5 licenses to boost mineral exploration

Saudi Arabia launches competition for 5 licenses to boost mineral exploration
Updated 21 July 2024

Saudi Arabia launches competition for 5 licenses to boost mineral exploration

Saudi Arabia launches competition for 5 licenses to boost mineral exploration

RIYADH: Saudi Arabia has unveiled its largest mineralized belts to date, spanning 4,788 sq. km and including five new exploration licenses. 

Three of the permits, which were offered to local and global firms, are reserved for the Jabal Sayid site in Madinah.  

It covers an area of 2,892 sq. km and entails minerals like gold, silver, copper, zinc, and lead, according to a statement issued by the Ministry of Industry and Mineral Resources.  

The remaining two licenses pertain to the Al-Hajjar Site in the Asir region, which encompasses 1,896 sq. km and also includes gold, silver, copper, zinc, and lead. 

This initiative aims to accelerate the exploration and development of Saudi Arabia's mineral resources, valued at SR9.3 trillion ($2.4 trillion).  

This is in line with Saudi Arabia’s ambition to transform mining into a foundational industrial pillar of the country’s economy. It also aligns with the ministry’s goal to further bolster the sector and contribute to ongoing developments under Saudi Vision 2030.    

Global electricity demand to grow by 4% in 2024: IEA 

Global electricity demand to grow by 4% in 2024: IEA 
Updated 21 July 2024

Global electricity demand to grow by 4% in 2024: IEA 

Global electricity demand to grow by 4% in 2024: IEA 

RIYADH: Global electricity demand is expected to rise by around 4 percent this year, up from 2.5 percent in 2023, driven by robust economic growth, according to an analysis.  

In its latest report, the International Energy Agency highlighted that intense heatwaves and the growing adoption of electricity-powered technologies, such as electric vehicles and heat pumps, are driving the increase in global electricity demand. 

Many regions experienced severe heatwaves in the first half of 2024, which heightened electricity needs and strained power grids. May was the hottest month of the year, marking the 12th consecutive month of record-high temperatures. 

India, Mexico, Pakistan, the US, Vietnam, and several other countries experienced severe heatwaves in the first half of the year, leading to surging peak loads due to increased cooling needs. 

“Growth in global electricity demand this year and next is set to be among the fastest in the past two decades, highlighting the growing role of electricity in our economies as well as the impacts of severe heatwaves,” said Keisuke Sadamori, director of Energy Markets and Security at IEA.  

The energy agency added that more households, especially in emerging economies, have started to purchase air conditioners, further driving electricity demand in these regions. 

The IEA also emphasized that adopting higher efficiency standards for air conditioning is crucial to mitigate the impact of increased cooling demand on power systems. 

The report also highlighted that expanding and reinforcing power grids is essential for ensuring a reliable electricity supply. 

The IEA noted that renewables are rapidly advancing globally, with solar photovoltaic set to achieve new records. 

India and China to drive growth 

The energy think tank further noted that this rise in electricity demand growth will be driven by countries like India, China, and the US.  

“We expect this demand trend to continue in 2025, with growth also at 4 percent. In both 2024 and 2025, the rise in the world’s electricity use is projected to be significantly higher than global GDP (gross domestic product) growth of 3.2 percent. In 2022 and 2023, electricity demand grew more slowly than GDP,” the IEA added.  

According to the analysis, electricity demand in China is forecast to increase by 6.5 percent in 2024, similar to its average rate between 2016 and 2019.  

India will witness an 8 percent rise in electricity consumption in 2024, matching its rapid growth in 2023.  

“In the first half of 2024, the country (India) grappled with heatwaves of record duration, with peak load reaching a new high and putting exceptional strains on power systems. Assuming a return to average weather conditions, we expect electricity demand growth in India to ease moderately to 6.8 percent in 2025,” the IEA added.  

The report further highlighted that electricity demand in the US is set to rebound significantly in 2024, increasing by 3 percent year-on-year, driven by a positive economic outlook and the rising need for air conditioning amid severe heatwaves.  

In the EU, demand is expected to increase by 1.7 percent as economic difficulties ease, but uncertainty over the pace of growth remains.  

“EU electricity consumption had contracted over the two previous years, with the decline in output from energy-intensive industries an important driver. Signs of a recovery in EU electricity demand emerged starting in the fourth quarter of 2023,” said the IEA.  

It added: “Growth gained further traction during the first half of 2024 as energy prices stabilized and various industries that had previously curtailed operations restarted.”  

Clean energy sources  

According to the analysis, despite a sharp rise in power consumption, solar PV alone is expected to meet roughly half of the growth in global electricity demand by 2025.  

IEA further noted that global electricity generation from solar PV and wind is expected to surpass that from hydropower in 2024.  

“The global energy transition is set to achieve another significant milestone by 2025, with total renewable generation poised to overtake coal-fired electricity output. The share of renewables in global electricity supply rose to 30 percent in 2023 and is projected to climb further to 35 percent in 2025,” said the IEA.  

Despite the sharp increases in renewables, global power generation from coal is unlikely to decline this year due to the strong growth in demand, especially in China and India.  

The study highlighted that carbon dioxide emissions from the global power sector are plateauing, with a slight increase in 2024 followed by a decline in 2025.  

“It’s encouraging to see clean energy’s share of the electricity mix continuing to rise, but this needs to happen at a much faster rate to meet international energy and climate goals,” said Sadamori.  

He added: “At the same time, it’s crucial to expand and reinforce grids to provide citizens with secure and reliable electricity supply – and to implement higher energy efficiency standards to reduce the impacts of increased cooling demand on power systems.”  

Meanwhile, Fatih Birol, IEA’s executive director, said that the energy industry should urgently reduce its carbon emissions if the world wants to avoid catastrophic climate change in the coming decades, according to a press statement.  

“About 80 percent of emissions that cause climate change come from fossil fuels. This is the reason there is a need to reduce emissions if we want a planet in the future that is like it is today,” Birol told the Al-Attiyah Foundation in a podcast interview.  

He added: ‘This doesn’t mean that tomorrow we will not need fossil fuels, but the share of fossil fuels needs to decline. If we don’t, we will face catastrophic implications like floods, heat waves, and other extreme weather events. Continuing with the current fossil fuel-based energy system is not good news for anybody— producers and consumers alike.”  

In the latest report, the IEA also projected that global nuclear generation is on track to reach a new high in 2025, surpassing its previous record in 2021.  

According to the energy agency, nuclear generation is forecast to rise globally by 1.6 percent in 2024 and by 3.5 percent in 2025, driven by a steady increase in output by the French nuclear power fleet as maintenance works are completed.  

The restarting of reactors in Japan and the arrival of new reactors in various markets, including China, India, Korea, and Europe, support the growth in nuclear power generation globally.  

The report also noted that the rise of artificial intelligence has put the electricity consumption of data centers in focus, making better stocktaking more important than ever. 

“In many regions, historical estimates of data centers’ electricity consumption are hampered by a lack of reliable data. At the same time, future projections include a very wide range of uncertainties related to the pace of deployment, the diverse and expanding applications of AI, and the potential for energy efficiency improvements,” said the IEA.  

It added: “Expanding and improving the collection of electricity demand data from the sector will be crucial to identify past developments correctly and to understand future trends better.”

AlUla participates in global forums to strengthen Saudi-China cultural ties

AlUla participates in global forums to strengthen Saudi-China cultural ties
Updated 21 July 2024

AlUla participates in global forums to strengthen Saudi-China cultural ties

AlUla participates in global forums to strengthen Saudi-China cultural ties

RIYADH: Saudi Arabia and China have deepened their cultural ties as the Royal Commission for AlUla participated in key global forums in Istanbul and Luoyang.  

The RCU attended the Silk Road Dialogue and the International Ancient Capitals Forum to enhance collaboration and showcase AlUla as the world’s “largest living museum.” 

The events, held from June 27 to 30, underscored AlUla’s prominent role within the International Tourism Alliance of Silk Road Cities, a network connecting 63 destinations across 28 countries along ancient trade routes.  

The forums were instrumental in expanding Saudi-China cultural partnerships and organizing official visits to AlUla. 

Saudi Arabia’s strategic focus on tourism, centered around AlUla’s rich heritage, has become a cornerstone in deepening cultural and economic ties with China, showcasing the Kingdom’s commitment to leveraging its historical assets to foster international partnerships. 

Discussions at the International Ancient Capitals Forum included high-level meetings with Luoyang officials on tourism, agriculture, conservation, and urban development, exploring new areas of cooperation between the two nations. 

“The Royal Commission for AlUla continues to build on the deep-rooted foundations of cultural partnership that exists between China, the Kingdom, and northwest Arabia,” said an RCU spokesperson in a statement. 

The spokesperson added: “The Silk Road Dialogue and International Ancient Capitals Forum events represented exciting opportunities to develop new avenues of collaboration, with a focus on expanding knowledge exchange and promoting tourism, with diverse initiatives built upon our shared status as ancient destinations and rapidly developing landmarks for human heritage.” 

The forum was launched to foster dialogue and collaboration between cities with a millennia-long history. It also facilitates an agreement signed earlier this year between AlUla and its Chinese partners at the Henan Provincial Administration of Cultural Heritage.  

The partnership seeks to enhance knowledge and shared resources, focusing on archeology, preserving cultural heritage and museums and research collaboration as well as talent development, tourism and other cultural exchanges. 

It also includes establishing a technology-driven archeological laboratory, conducting excavation activities, engaging in research and fostering connections between heritage sites in AlUla and Henan. 

The deal further involved implementing collaborative exchange programs, participating in exhibitions and events, and utilizing museum technologies such as virtual reality and augmented reality.