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Saudi Arabia’s ambitious giga-projects are driving up construction costs in the region, with Riyadh emerging as the most expensive city to build in the Middle East.

Construction Costs on the Rise

The International Construction Market Survey (ICMS) 2024 report reveals that rising demand, particularly in the Kingdom of Saudi Arabia, is pushing up construction costs. Riyadh tops the list as the region’s most expensive city to build in, with an average cost of $2,593 per m².

Giga-Projects Fuel Demand

The Saudi capital is benefiting from accelerated growth, driven by state-backed initiatives such as NEOM and the 2030 Vision. This rapid investment is attracting global talent, but also impacting supply chain capacity. Construction cost inflation in Riyadh is easing from the highs of 7% seen in 2023, but is forecasted to remain high at 5% through 2024.

Labour Shortages and Supply Chain Constraints

Skilled labour shortages are keeping costs elevated, and the talent and resources needed for giga-projects in the country are stretching overall supply chain capacity across the Middle East. This has led to a distinct shortage of skilled labour that is vital to deliver the country’s most ambitious programmes.

Regional Comparisons

Doha is the second most expensive market in the region, with an average cost of $2,096 per m². In contrast, Dubai has an average cost to build of $1,874 per m², with a growing population and high tourism rates driving activity in the residential development and hospitality sectors.

Prioritising Procurement Strategies

In the face of potential labour bottlenecks, clients are advised to prioritise identifying the right procurement strategies and establishing innovative ways of working and digital techniques to battle the capacity crunch and get more for less.

Conclusion

Saudi Arabia’s mega-projects are driving up construction costs in the region, with Riyadh leading the pack. While opportunities abound, clients must navigate labour capacity constraints and prioritise procurement strategies to maximise potential.

Let’s discuss the implications of this report and what it means for the construction industry. Share your thoughts in the comments below!