Ambitious Saudi Giga-Projects Drive Middle Eastern Construction Boom
Giga-projects in Saudi Arabia are significantly driving up construction costs, particularly in Riyadh.
3 min
According to Turner & Townsend‘s 2024 International Construction Market Survey (ICMS), a global professional services company, highlights that ambitious state-backed developments and giga-projects are propelling construction activities across the Middle East. The surge in investment, coupled with inflation reductions and economic diversification, is attracting global talent but also straining supply chain capacities.
Saudi Construction Costs
The report indicates that the rising demand in the Kingdom of Saudi Arabia is elevating construction costs. Riyadh leads the region with construction costs at $2,593 per m², benefiting from rapid growth. Both domestic and foreign investments are leveraging state-backed initiatives like NEOM and Vision 2030. Although construction cost inflation in Riyadh has eased from the 2023 peak of 7%, it is forecasted to remain high at 5% through 2024.
This demand surge is partially driven by increased construction in sports, leisure, and hospitality sectors as the country prepares for EXPO 2030 and the 2034 FIFA World Cup. The average cost of building a five-star luxury hotel in Riyadh is now $4,798 per m², while the price for a high-rise CBD office stands at $2,266 per m². However, the shortage of skilled labor is keeping costs elevated, as the country struggles to meet the demands of its ambitious projects.
The need for talent and resources for these giga-projects is also stretching the overall supply chain capacity across the Middle East. Doha ranks as the second most expensive market in the region at $2,096 per m². Following the high construction output leading up to the 2022 World Cup, inflation is expected to decrease from 3.5% in 2023 to 2.5% in 2024, reflecting a softening in demand as investment and skilled labor migrate to Saudi Arabia.
In neighboring Dubai, the average construction cost is $1,874 per m². The city’s growing population and high tourism rates continue to drive activity in residential development and hospitality sectors, supported by relatively low labor costs. Consistent market investment, fueled by foreign visitors and skilled migrants, is expected to result in a 5% increase in construction costs through 2024.
Strategic Recommendations
Turner & Townsend advises clients to prioritize procurement strategies and adopt innovative digital techniques to navigate potential labor hold-ups and maximize efficiency.
Mark Hamill, director and head of Middle East real estate and major programs at Turner & Townsend, noted: “Over the past year, we’ve seen the Middle East continue to be a hub of major growth and investment as the region aims to move beyond its economic dependence on oil.
“The stand-out story is the accelerated development of KSA, where vast ambitions are being realised via projects like The Line, King Salman Park and Diriyah Gate.
“Despite the KSA leading the pack in terms of activity in the Middle East, there remain considerable real estate opportunities in the UAE and Qatar as inflation cools.
“Nevertheless, with labour capacity being stretched across the region, clients will need to review their procurement and contracting models to help mitigate supply chain disruption and maximise the potential opportunities on offer.”
Global Construction Trends
The ICMS report, surveying 91 global cities, reveals that the US continues to dominate the rankings of the most expensive places to build, with six US cities in the top ten. New York retains its position as the most expensive market globally at an average cost of $5,723 per m².
Worldwide deglobalisation trends and nearshoring prompted by supply chain disruption and geopolitical tensions are seeing growth and investment in manufacturing, especially in emerging international markets such as Malaysia, Indonesia, Nigeria, Brazil and Mexico.
Labour constraints remain a significant inflationary factor globally, and all but three of the 91 markets surveyed reported an impact from a shortage of skills.
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
This collaboration will extend into the fourth phase of Azizi’s Riviera project in MBR City, with Cummins supplying top-tier power generators.
2 min
Azizi Developments, a prominent private developer in the UAE, and Cummins Inc., a global leader in power solutions design, manufacturing, distribution, and supply, are extending their partnership into the fourth phase of the large-scale Riviera project. Cummins, known for its diverse range of products including diesel, natural gas, electric, and hybrid powertrains, as well as powertrain-related components, like filtration, after-treatment, turbochargers, fuel systems, control systems, air handling systems, automated transmissions, electric power generation systems, batteries, hydrogen generation, and fuel cell products. The manufacturer is globally renowned for its excellence in both innovation and sustainability.
Mr. Farhad Azizi, CEO of Azizi Developments, said: “As we continue our collaboration with Cummins Inc. for the fourth phase of our flagship project, Riviera, we reaffirm our commitment to procuring and utilizing only the highest quality materials. This partnership highlights our dedication to providing exceptional lifestyles for our investors and end-users through the careful selection of premium components. We are confident that our now-broadened alliance with Cummins Inc. will help in maintaining the high standards established for Riviera and further elevate the benchmarks of quality and excellence.”
Riviera is part of Azizi Developments’ award-winning portfolio. It is a stylish waterfront lifestyle destination that comprises 75 mid- and high-rise buildings with approximately 16,000 residences.
Designed to introduce the French-Mediterranean lifestyle to Dubai, which is not merely about architectural art, but also about a certain ‘joie de vivre’ — a celebration of life, an exultation of spirit, Riviera represents a new landmark destination that is both residential and commercial, with an abundance of retail space. Riviera features three districts: an extensive retail boulevard, a lagoon walk on the shores of its 2.7 km-long swimmable crystal lagoon with artisan eateries and boutiques, and Les Jardins — a vast, lush-green social space.
With its strategic location near the upcoming Meydan One Mall and the Meydan Racecourse — home of the Dubai World Cup — as well as Dubai’s most noteworthy points of interest, Riviera represents one of Azizi Developments’ most coveted projects.
Azizi Developments’ Sales Gallery can be visited on the 13th floor of the Conrad Hotel on Sheikh Zayed Road.
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
