Market Trends of Saudi Arabia Construction Industry
Increase in the Total Value of Construction Contracts Awarded in Saudi Arabia
Saudi Arabia's pipeline value of unawarded (pre-execution) projects is estimated at USD 1.1 trillion, which includes projects from the study stage through the leading contractor bid. Approximately 70% comprise construction sector projects, with residential, cultural, leisure, and hospitality as sub-sector leaders. This is the driving force behind the Vision 2030 strategy. In the second half of 2022, 13,000 hotel keys were expected to be delivered in Riyadh, Jeddah, and Makkah, accentuating the continuation of the development of the Kingdom's hospitality sector.
The top ten contractors in the Kingdom are responsible for USD 400 billion in projects, which are currently in the execution stage, accounting for 40% of the total future pipeline value of USD 1.1 trillion. According to MEED Projects, the total value of projects awarded in Saudi Arabia between 2021 and 2025 is expected to reach USD 569 billion, with a total of USD 85 billion (15%) awarded to date across 2021 and 2022 (October end).
Global economic volatility in the first two quarters of 2022 created challenges in the local construction market regarding delivery lead times and instant price increases, with suppliers reluctant to guarantee prices for extended periods.
Emergence of Saudi Arabia as a Cultural and Religious Tourism Center is Likely to Promote the Construction Demand
The Kingdom's hotel construction rate is anticipated to nearly triple in 2023, with nearly 50% of the 167 projects on file due for delivery within those 12 months.
Altogether, 56% (35,884) of the 63,753 Saudi Arabian rooms in the database are expected to come online in 2023, dwarfing the 9,207 keys from the 24 projects in 2022. Development is anticipated to return to near this rate in 2024, with 23 projects delivering 9,599 rooms, while 2025 and beyond are likely to see at least another 40 hotels representing 9,063 keys joining the market.
First-class four-star properties account for 77 projects and 30,229 rooms - 46% of the total, with the remaining 54% in the five-star luxury segment, equating to 90 builds comprising 33,524 keys.
A significant proportion of the development wave is due to a number of megaprojects taking shape in Makkah (Mecca). While in terms of pure project totals, the 27 hotels slated for the Islamic religious center only put it third on the top Saudi cities list, the 31,957 keys which are expected to become available in the area are more than three times that of the number one city by project number - which is Riyadh, with 45 hotels totaling 9,302 rooms.
Second in this analysis is Jeddah, with 33 projects delivering 7,148 rooms, while fourth in the list is Al Wajh, representing 12 projects of collectively 4,868 keys.
