Why Saudi Arabia is likely to lead GCC construction recovery

September 3, 2019

Activity in the construction sector across the Gulf region will begin to recover steadily from the beginning of 2020, after a challenging period of subdued performance, according to project management consultancy Linesight.

Long-term positive factors such as economic diversification, social reform, especially in Saudi Arabia, and general demographic demand, combined with renewed government ambition, will be the key drivers, it said in a report.

It said Saudi Arabia currently holds the greatest potential for the construction sector within the GCC, with more than 5,000 capital projects worth well over $1.6 trillion in the pre-execution stage.

That includes over 150 development projects worth $3.27 billion, for the Tabuk region, in the northwest of Saudi Arabia, that were announced by Saudi’s King Salman in November last year.

The king also launched more than 600 projects in Qassim, 400km north west of Riyadh, worth $4.36 billion and around another 200 new projects in Hail, also in the north west of the Kingdom, valued at $1.14 billion.

Linesight said the centrepiece of its ambitious Vision 2030 initiative, is the $500 billion, 26,500 sq km, Neom project, situated along 468km of Saudi’s Red Sea coast close to Egypt and Jordan. The first phase of Neom, is due for completion in 2025.

“Naturally many regional industry professionals are now upbeat about the prospects for Saudi Arabia,” said Damien Gallogly, regional director for the Middle East at Linesight, which has offices in Riyadh, Dubai and Bahrain.

“Saudi Arabia is also actively seeking to improve its rail, airport, port and other transport-related infrastructure, as well as increase residential supply, healthcare, leisure and tourism facilities. Without doubt, the kingdom remains the most active construction market in the region, signalling exciting times ahead,” added Gallogly.

“To underpin social demand, the Saudi government has overseen a major cultural and social transition since 2017, which has allowed mixed audiences at cinemas and concerts and brought an end to restrictions on women travelling alone,” he said.

Doubts have been cast whether Saudi will be able to fund the realisation of Vision 2030. And with US shale oil extraction at a record 12.32 million barrels per day on average, the US–China trade tensions dragging on and the slowing global economy, on the surface, the task looks challenging.

But Gallogly said: “Saudi Arabia is committed to completing these projects and is confident that it will be find the appropriate finance to do so. It is this strategic intent that in my opinion, makes the kingdom the most dynamic construction market in the Middle East.”