Leading Middle East markets continue to experience high-growth in construction activity, as the region invests in nation-building agendas that support economic diversification away from fossil fuels, according to global professional services consultancy Turner & Townsend.
The Kingdom of Saudi Arabia leads the region in new project opportunities and government commitment to major infrastructure investment, with average cost to build in Riyadh seen at $2,379 per sq m, while Doha market activity is cooling after unprecedented World Cup programmes, stated the industry expert in its International Construction Market Survey (ICMS).
The survey also shows that the region has been less affected by supply chain disruption and softening growth seen in other markets.
Turner & Townsend pointed out that the Middle East presents a relative bright spot in a challenging global construction market, with many regions experiencing high costs and inflation, as well as critical labour shortages.
The top consultancy’s data reveals that 74.2% of global markets show a ‘skills shortage’ in the report.
From a survey of 89 global cities, the US dominates the rankings of the most expensive places to build, with six US cities in the top ten. New York is the most expensive market, with an average build cost of $5,451 per sq m, and San Francisco following closely behind on $5,200.
According to ICMS, the most expensive location to build in the region is Doha, with an average cost of $2,588 per sq m.
Qatar has seen sustained cost inflation due to extensive construction activity in recent years, in particular to prepare for the FIFA World Cup in 2022, it stated.
The Doha market is now cooling, following the completion of the competition, with the rate of cost inflation easing from 8.0% in 2022 to 3.5% in 2023.
By comparison, costs in Riyadh rose by 10 per cent during 2022, establishing an average cost to build of $2,379 per sq m, it added.
Turner & Townsend forecasts that costs will continue to rise by 7.5% during 2023 as the Kingdom of Saudi Arabia sees unprecedented investment in new ‘giga-projects’ as part of the country’s ambitious Vision 2030 programme.
These include NEOM, a new 265,000 sq km city in the north west of the country, as well as flagship entertainment projects such as Qiddiya near Riyadh and the SEVEN ventures across the Kingdom.
The UAE is seeing stable conditions, with an average cost escalation of 4.0% over 2022 and 2023 in Abu Dhabi and 5.0% in Dubai. Hot markets for the UAE include luxury development, including for tourism, as well new infrastructure and improved public realm, stated the report.
A major milestone for the country, and the wider region, is the COP28 conference which will take place later this year. Turner & Townsend’s report identifies the increasing prioritisation of sustainable building practices to reduce carbon emissions and protect water resources across the region.
While the development outlook for the Middle East is buoyant, Turner & Townsend has warned that capacity and resource will need to be carefully coordinated to avoid risks to project delivery and offset growing competition for labour.
Source: TradeArabia News Service