Construction is ‘cheaper in Dubai than Riyadh or Doha’

June 21, 2024, 10:24 AM

Rooftop dining at a luxury hotel in Doha. The city's construction costs rank second in the region, cheaper than Riyadh but higher than Dubai

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Dubai is only the third most expensive construction market in the Middle East after Riyadh and Doha, research has found.

A real estate boom led by the leisure, hospitality and sports sectors, combined with a “distinct shortage of skilled labour”, have driven up construction costs in the Saudi capital to an average of $2,593 per square metre, according to consultancy Turner & Townsend.

Its International Construction Market Survey says resort hotels are the most expensive kind of real estate to build in Riyadh at $5,331. Outside the hospitality market, the next most expensive building type is general hospitals at $2,932.

The Qatari capital ranks second in the region with average construction costs of $2,096 per square metre, according to the research published this week. However, this figure is expected to grow by only 2.5 percent in 2024, down from 3.5 percent in 2023.

As the effects of the 2022 World Cup recede, resources that were in Doha are increasingly being absorbed by Saudi Arabia’s giga-projects.

This is the first time that Riyadh has topped the Turner & Townsend ranking for the Middle East. Doha was No 1 from 2021 to 2023.

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In comparison, Dubai is a surprisingly good deal with average construction costs of $1,874 per square metre – and only $1,334 for a residential high rise.

However, population and investment growth in Dubai are slated to push building cost inflation 5 percent higher this year, a growth rate that is on a par with Riyadh's.

Abu Dhabi comes just below Dubai in the global ranking, at $1,844 per square metre.

“Despite the kingdom leading the pack in terms of activity in the Middle East, there remain considerable real estate opportunities in the UAE and Qatar as inflation cools,” said Mark Hamill, Turner & Townsend’s head of Middle East real estate.

“Nevertheless, with labour capacity being stretched across the region, clients will need to review their procurement and contracting models to help mitigate supply chain disruption and maximise the potential opportunities on offer.”

The report, now in its 15th year, was compiled in Q1 2024 and covers 91 markets in 42 countries.

The US leads the global ranking, with six American cities among the 10 most expensive construction markets.

For the second year in a row, New York took the No 1 spot with an average construction price of $5,723 per square metre. While first in the Middle East, Riyadh ranked 56th globally.