Dublin, June 14, 2024 (GLOBE NEWSWIRE) -- The "Saudi Arabia Construction Industry Databook Series - Market Size & Forecast by Value and Volume (area and units), Q1 2024 Update" report has been added to ResearchAndMarkets.com's offering.
The construction industry in Saudi Arabia is expected to grow by 6.2% to reach SAR 232,147 million in 2024.
Despite near-term challenges in certain construction sectors, medium to long term growth story in Saudi Arabia remains intact. The construction industry in Saudi Arabia is expected to grow steadily over the next four quarters. The growth momentum is expected to continue over the forecast period, recording a CAGR of 2.3% during 2024-2028. The construction output in the country is expected to reach SAR 284,513.2 million by 2028.
The construction market is expected to record strong growth over the medium term in the Kingdom of Saudi Arabia. The government has decided to invest US$800 billion into its tourism industry to attract a whopping 150 million visitors. By 2030, the Kingdom aims to boost the number of hotel rooms available to 550,000. This has resulted in several new project launches by global hoteliers that are seeking to tap into the growth opportunity.
The residential and commercial construction market is also projected to report strong growth in 2024. Several new projects have been announced in the sector. In the data center segment, for instance, global firms like Amazon have announced multi-billion-dollar investments as the Kingdom seeks to diversify its oil-dependent economy. Overall, the publisher maintains a positive growth outlook for the industry over the next three to four years.
New hotel construction projects to aid market growth in the Kingdom of Saudi Arabia in 2024
Saudi Arabia has decided to invest US$800 billion into its tourism industry to attract a whopping 150 million visitors. With the Kingdom targeting to become a global tourism destination over the medium to long-term perspective, hoteliers are increasing their investment in the country and are launching new projects at a significant pace. Regal Hotels Group, in January 2024, partnered with the Cosmopolitan International Group and the Ministry of Investment of Saudi Arabia to develop properties across the nation.
Hilton, in February 2024, announced that the firm is poised to quadruple its presence in the Kingdom. Hilton has already started construction activities for about two-thirds of its planned hotels in Saudi Arabia. The firm is aiming to have over 100 properties in the country in the next few years.
Al Akaria, in February 2024, also entered into a strategic partnership with Mariott to launch the Autograph hotel brand in Riyadh. Going forward, in 2024, several such projects are expected to be launched in the Kingdom. By 2030, the Kingdom aims to boost the number of hotel rooms available to 550,000. This will keep providing growth support to the broader construction market in 2024.
Saudi Arabia scales back the ambitious US$1.5 trillion desert project Neom due to declining cash reserves
As part of the efforts to diversify the oil-dependent economy, the Kingdom announced US$1.5 trillion worth of desert project Neom. The government, notably, hoped to have 1.5 million residents living in The Line by 2030. However, the project has been scaled down and the development is expected to house less than 300,000 residents by that time. The Line, the futuristic city spanning over 170 kilometers, has been planned to be built in various stages. The latest pullback means that only 2.4 kilometers of development is projected to happen by 2030.
There are several reasons why the Kingdom has decided to scale back one of its most ambitious infrastructure projects. The major reason seems to be the economics of it all. The Neom budget for 2024 has not been approved yet by the Kingdom's sovereign wealth fund due to declining cash reserves.
The downscaling of the Neom project is also expected to have an impact on the growth of the construction market in the Kingdom over the medium term. Despite this, the publisher maintains a positive growth outlook for the industry over the next three to four years, as the government continues to diversify its oil-dependent economy towards becoming a global tourism destination.
Housing and data center construction projects to lend growth support to the market in 2024
The residential construction market is expected to record strong growth over the medium term in Saudi Arabia. The Kingdom, in January 2024, launched a new housing project including 390 villas and townhouses for its citizens. The National Housing Company, linked to the Housing Ministry, announced a new project in Jeddah's Western Red Sea port area covering about 3.8 million square meters. Several such projects are under construction and more are projected to be launched going ahead in 2024.
In the data center sector, leading global tech firms such as Amazon have announced multi-billion-dollar investments in the Kingdom. Amazon Web Services, for instance, has announced an investment of US$5.3 billion to develop new data centers in the region. In 2023, Amazon alongside other tech firms such as Microsoft and Google have also established their headquarters in Saudi Arabia. Domestic firms like DataVolt have also announced an investment of US$5 billion towards the development of new data center facilities across the nation. These projects will provide growth support to the broader construction market in the Kingdom over the next three to four years.
The construction market in the Kingdom of Saudi Arabia is poised for accelerated growth over the next five years. Driven by increased infrastructure spending and commercial construction projects, the Saudi Arabian construction industry is projected to lead the growth of the regional market from the short to medium-term perspective in the Middle East.
Projects like the Neom and the Red Sea resorts will drive construction spending in the Kingdom over the next three to four years, thereby supporting the growth of the construction industry. As part of its 2030 ambitious plan, the Kingdom is also launching new airports as it seeks to transform itself into a global tourism destination. Overall, the publisher maintains a robust growth outlook for the Saudi Arabian construction industry over the next three to four years.
The housing construction sector is expected to experience strong growth in the Kingdom of Saudi Arabia
Over the next five years, the residential market is poised for an accelerated growth trajectory in the Kingdom. This growth will be driven by the strong pipeline of housing projects announced by the government in 2023.
The Kingdom, in September 2023, announced housing projects worth US$17.3 billion or SAR 65 billion. These projects were announced during the Cityscape Global exhibition. During the exhibition, Thakher Development Co. also revealed the ambitious Radisson Hotel & Residences project valuing more than SAR 200 million.
The National Housing Company initiated three residential projects in the outskirts of Al-Forsan and Khuzam, with the goal of improving the quality of life. These projects offer a total of 86,000 housing units, valued at over SAR 42 billion. The National Housing Company revealed plans for an extensive business venture in the Khuzam suburb, known as the Khuzam Business Center. Spanning across an area exceeding 500,000 square meters, this integrated project is set to redefine the business landscape in the region.
Going forward, the publisher expects more investment to enter into the housing construction market in the Kingdom, which will subsequently aid the growth of the broader industry from the short to medium-term perspective.
Giga projects will continue to aid construction market growth in H2 2023 and Q1 2024 in the Kingdom
The construction industry in Saudi Arabia reported a growth of 4% during the second quarter of 2023, compared to the same period in 2022, according to a report from Jadwa Investments. Notably, the construction industry has been reporting a consistent growth trajectory over the last few quarters, as the Kingdom continues to push towards a diversified economy under its Vision 2030.
The publisher expects the trend to further continue in H2 2023 and Q1 2024 in the Kingdom of Saudi Arabia. The undertaking of new infrastructure projects, coupled with the ongoing construction activities of major projects like the Neom and Red Sea resorts, will support the market growth from the short to medium-term perspective. Going forward, the publisher also expects the Kingdom to roll out new investments towards the development of water treatment facilities, roads, and bridges to meet the needs of the rising population. These construction projects will also aid the market growth over the next five years.
Cement firms are expected to slash prices amid growing competition in the Kingdom of Saudi Arabia
The publisher is foreseeing a price war between cement manufacturers in the central region of Saudi Arabia in H2 2023. This is largely due to the fact that the majority of the giga projects, currently under construction, are located in the central region. Because of this, major players from across the Kingdom have ventured into the region to tap into the growing demand for cement over the next five years.
The fierce competition for market share, especially in the central region of the Kingdom, is likely to result in a price war with firms expected to slash prices on a larger scale in H2 2023. The trend already emerged in Q1 2023, when the average selling price of cement remained under pressure, falling to SAR174.3 per ton from SAR 186 in the quarter before. The drop in prices also comes amid the booming housing market in the Kingdom. This is a clear indication that the fierce competition and high demand are likely to lead to further price slashes over the next few quarters in Saudi Arabia.
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