Riyadh construction cost hike due in 2019 amid Saudi building boom

New Turner & Townsend research states Riyadh building costs to grow by 5% as mixed-use megaprojects emerge

Riyadh construction costs may grow in 2019.
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Riyadh construction costs may grow in 2019.

Middle East construction news of relevance to procurement teams has emerged as building costs are predicted to observe an upward trend in 2019, with the strongest growth forecasted for Saudi Arabia’s capital city Riyadh at 5%, followed by the UAE at 2%, according to UK-headquartered Turner & Townsend.

In its latest International Construction Market Survey, the Leeds based firm evaluated input costs, including labour and materials, and recorded the average construction cost per m2 for commercial and residential projects across the region. 

On the back of positive oil revenues and economic diversification programmes, the previously stagnant construction markets of Muscat and Riyadh have been showing signs of growth. H2 2019 CONSTRUCTION START FOR $23BN RIYADH URBAN PROJECTS

In the UAE, the cost of construction has been predicted to grow by 2% in 2019, up from 1.5% in 2018.  Significantly, market confidence in the UAE is being buoyed by major projects in Dubai, including Expo 2020 Dubai, and extensive infrastructure investment in Abu Dhabi.

According to the report, construction costs in Riyadh are anticipated to reach $1,288 (SAR4,830.45) per m2 on average. At a rate of 5%, predictions for the kingdom's building prices surpass the global cost inflation forecast of 4.1% for 2019. 

Growth forecasts are driven by the growth of several mixed-use projects in the kingdom, including Al Widyan, ongoing building works within King Abdulla Financial District, and the country's evolving entertainment construction sector, in line with the goals of Vision 2030.

The same long-term vision is also driving various similarly major construction schemes in the kingdom, which is building homes, among other essential infrastructure, to meet the rapidly growing need for urban utilities as part of its National Transformation Programme.

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While the UAE construction market is described as a balanced one by the report, Muscat and Riyadh are named as two of only five global markets to report a surplus of construction labour.

Commenting on the rising construction costs in the region, Adam Ralph, director and head of real estate in Middle East at Turner & Townsend, said: “The rallying of oil prices in the short-term has provided fresh impetus and opportunities in the region, but ultimately, it is diversification of the economic base away from oil and gas that is set to be the key driver of construction demand across the Middle East in the long term.”

According to Ralph, government-backed infrastructure projects and economic development programmes are starting to invigorate the construction market and attract strong private-sector investment, such as the Duqm Special Economic Zone and the related $2.6bn (OMR1bn) freight railway line in Oman. 

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