The construction industry in Saudi Arabia remains sturdy despite encountering some challenges due to increasing inflation and global economic uncertainties.
A recent study by real estate company JLL reveals that Saudi Arabia possesses the most extensive pipeline of construction projects in the Middle East and North Africa region, valued at $1.5T. This constitutes 39 percent of the total $3.9T construction pipeline in MENA.
The majority of Saudi’s pipeline is concentrated in the building and infrastructure sectors.
Laura Morgan, Market Intelligence Lead for MEA at JLL, commented, “Economic growth, a growing population, and modernisation have positioned Saudi Arabia as the most active participant in the Middle East construction market, with the real estate sector leading the Kingdom’s project market in 2023. The remarkable resilience of the sector amidst global uncertainties reflects the success of the Kingdom’s economic diversification strategies.”
The Kingdom continues to experience robust growth propelled by its Vision 2030 reforms aimed at diversifying the economy away from oil.
According to the report, construction activity witnessed an increase in the fourth quarter of 2023, with higher indexes recorded.
Non-oil sectors now contribute half of Saudi Arabia’s GDP, compared to one-third from oil. Tourism generated $66B in revenue last year, with leisure and hospitality accounting for 23 per cent of projects awarded in the first quarter.
The Construction Sector Stays Sturdy Despite Challenges
Although challenges such as inflation, labour shortages, and rising material costs were acknowledged, Riyad Bank remains optimistic about positive domestic demand conditions. Its Purchasing Managers’ Index dipped slightly to 57.0 in March but remains in expansion territory.
Morgan added, “As market dynamics continue to evolve, the impact of construction costs on the sector’s robust growth cannot be ignored, and other market constraints such as a shortage of skilled labour, resource availability, and an overheating market could exert undue pressure on the Kingdom’s construction activity.”
However, stable availability of construction materials was reported in the first quarter despite dependence on imports.
