ALBAWABA – The government has awarded hundreds of billions worth of construction contracts since 2016, when the Saudi construction boom started, with property and infrastructure projects valued at around $1.25 trillion, Bloomberg reported Thursday.
Some $250 billion worth of construction contracts were awarded in the last seven to eight years as Saudi Arabia pushes forward with its national transformation agenda.
Property and infrastructure projects valued at $1.25 trillion have been announced across the country including the high-tech new city of Neom, according to property consultant Knight Frank LLP.
The government also unveiled vast new tourism and entertainment projects aimed at attracting visitors from around the world, while also encouraging Saudis to spend more domestically.
“Saudi Arabia will become the world’s largest construction site,” said Faisal Durrani, head of Middle East research at Knight Frank. “It is a mammoth task,” he said, and “modern methods of construction like 3D printing, modular construction and off-site manufacture[ing] must be embraced.”
The so-called giga projects are key to Saudi Arabia’s plans to transform into a top tourism destination and move its economy away from its hydrocarbon and oil dependency.
Tourism is part of Saudi construction boom
Contracts worth $70 billion were awarded to build parts of Neom and work valued at $21 billion has been awarded by Red Sea Global for a tourism development along the west coast, according to Knight Frank.
A view of the city of Riyadh, the capital of Saudi Arabia - Shutterstock
The Red Sea project, first announced in 2017, covers 28,000 square kilometres, an area about the size of Belgium, and will cost $23.6 billion to build, according to Bloomberg.
It will target regional and international luxury travelers with resorts on the coast, including an archipelago of 90 islands. The first hotels are set to open later in 2023.
Saudi Arabia also plans to build 660,000 homes, almost as much as neighboring Dubai’s entire housing supply, and add 289,000 hotel rooms, 6 million square meters of office and 5.3 million square meters of retail space, according to Knight Frank.
Affordability is the biggest challenge for Saudi construction boom
Meanwhile, affordability will be a key hurdle in a country where home sales have declined, Durrani said. Accessible price points for the new inventory will be critical to reigniting domestic demand.
“The challenge for the nation’s giga project developers will be to cater to and appeal to domestic buyers, two-thirds of whom” have budgets of under $400,000, Harmen de Jong, Knight Frank’s head of strategy and consultancy in Saudi Arabia wrote in the report.
“With most giga projects expected to launch residential product[s] at over $1 million [a piece], bridging this gap between demand and expectations will undoubtedly emerge as a key consideration going forward.”
