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Monday, June 24, 2024

Megaproject investment boosts Middle East construction market


Global professional services consultancy Turner & Townsend says construction activity in key Middle Eastern markets continues to grow at a high pace as the region invests in a nation-building agenda that supports economic diversification away from fossil fuels.

Industry experts say the Kingdom of Saudi Arabia leads the region in terms of new project opportunities and the government’s commitment to major infrastructure investment, with average construction costs in Riyadh at $2,379 per square metre, while market activity in Doha is underway following unprecedented World Cup projects. cool down. In its International Construction Market Survey (ICMS).

The survey also showed that the region was less impacted by supply chain disruptions and weaker growth in other markets.

Turner & Townsend pointed to the Middle East as a relative bright spot in a challenging global construction market, with many regions experiencing high costs and inflation, as well as severe labor shortages.

According to the top consultancy, 74.2% of the world’s markets have a “skills shortage” in the report.

The survey of 89 cities around the world shows that the United States dominates the ranking of cities with the highest construction costs, with six cities in the United States among the top ten. New York was the most expensive market, with an average construction cost of $5,451 per square meter, followed by San Francisco at $5,200.

The highest construction cost in the region is in Doha, with an average cost of $2,588 per square meter, according to ICMS.

Qatar said costs have continued to rise due to heavy construction activity in recent years, especially in preparation for the 2022 FIFA World Cup.

The Doha market is currently cooling after the race, with cost inflation falling from 8.0% in 2022 to 3.5% in 2023.

In contrast, costs in Riyadh will rise by 10% in 2022, with an average construction cost of $2,379 per square meter.

Turner & Townsend predicts that costs will continue to rise by 7.5% in 2023 as the Kingdom spends unprecedented amounts on new “megaprojects” as part of the country’s ambitious Vision 2030 programme.

These include the new 265,000-square-kilometre city of NEOM in the north-west of the country, as well as flagship entertainment projects such as Qiddiya near Riyadh and SEVEN projects across the kingdom.

The situation is stable in the UAE, with average costs rising by 4.0% in Abu Dhabi and 5.0% in Dubai in 2022 and 2023. Hot markets in the UAE include luxury developments, including tourism, as well as new infrastructure and improved public realm, the report said.

An important milestone for the country and the wider region is the COP28 meeting later this year. The Turner and Townsend report noted that sustainable building practices are gaining traction to reduce carbon emissions and conserve water resources across the region.

While development prospects in the Middle East are positive, Turner and Townsend warn that capacity and resources need to be carefully coordinated to avoid project delivery risks and offset increasing competition for labor.

Mark Hamill, Director and Head of Real Estate and Major Projects Middle East at Turner & Townsend, said: “The Middle East continues to be an investment hub, with some of the most ambitious infrastructure and development projects in the world. With support, these nation-building agendas will transform the region over the next decade.”

“However, a lot of work needs to be matched with careful planning to avoid the risk of overheating the market and rising costs,” he noted.

“Projects need to focus on smart procurement to build the capacity of local skilled labor and attract new market entrants. This will ensure that projects create a capable and resilient supply chain rather than competing for resources,” he added.– trade arab news agency


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