Skip to content Skip to Search
Skip navigation

Saudi construction under pressure to deliver on its promise

Saudi Real Estate Refinance Company said the issuance had garnered interest from institutional investors Shutterstock/Quality Stock Arts
Saudi Real Estate Refinance Company said the issuance had garnered interest from institutional investors
  • Sector worth $1.25trn
  • China increasingly important partner
  • Sustainability demands changing practices

The Saudi construction sector is growing as the state showers money on giga-projects while oil prices are high, but the industry is under increasing government pressure to deliver, industry players say. 

A market that was previously dominated by favoured government contractors such as Binladin Group and the now defunct Saudi Oger has been liberalised. This has allowed hundreds of local and global companies a piece of the action as Saudi Arabia embarks on a mammoth development programme to create a non-oil economy.

“It’s a golden opportunity now; there is enough for everyone,” says Yousef Al Sabhan, deputy general manager of Saudi Zaas Construction.

“Especially with the government making the regulations so easy. We’ve been in the market for 30 years, and now it’s much more open.”

The total value of real estate and infrastructure projects has been valued at $1.25 trillion, in addition to $250 billion of commissioned projects. 

The giga-projects include the city Neom, the Red Sea Project and Amaala tourist resorts, education and sports city Qiddiyya. Entertainment district Seven, the Roshn and Jeddah Central housing projects, make up the others, as well as five economic zones and other infrastructure schemes. 

China’s growing influence

Chinese companies have become new players for sourcing of supplies, reflecting closer political and economic ties between Riyadh and Beijing. This has alarmed the US, Saudi Arabia’s traditional ally.   

“China has also been investing in building material capacity, setting up ceramic tile plants in the last couple of years,” says Anoop Mark Fernandes, vice-president of research at Sico Capital in Bahrain. 

Bidding processes and documentation have become more transparent and easier through the government’s Etimad platform.

Many online contracting systems are being developed, as well as drone technology that allows builders to monitor sites from every angle. 

Saudi Arabia’s $500 billion giga-project Neom includes luxury destination Sindalah
Getting it done

But both developers and contractors are under pressure to produce results. 

“How do you translate a pretty image or vision that’s not going into too much detail at the early stage into something tangible?” Anastasios Dimas, regional digital delivery lead at AtkinsRéalis consulting firm asked at a construction conference in Riyadh this month. 

“Getting everyone on board with that vision is a big task in itself. There is also a lot of effort required to bring it down to scale, and it’s getting more and more difficult. It’s hard for the market to catch up with the visions.” 

Non-payment, which has blighted the sector in periods of low oil in the past, is also an issue. 

Khaled Gharaibeh, contracts director at developer Rua Al Madinah, says developers are shifting to a more collaborative approach in which contractors bid for specific elements. 

“Once chosen, they sit around the table and agree on a target budget,” Gharaibeh said at the conference.  

Phase One of Saudi developer Red Sea Global's Amaala is focused on the Triple Bay masterplan and will be ready by early 2025Amaala
Tourism forms a key element of giga-projects including the Amaala tourist resort
Adapting to sustainability

Projects such as Neom also have sustainability requirements that for many companies are a new way of working, requiring them to hire sustainability managers who make sure they work with certified vendors and suppliers. 

“Each project of Neom has different sustainability standards,” says Maryam Telmesani, sustainability officer at India’s MLB Infrastructure. 

“So, if you don’t have a company that’s ready to learn and asks questions, it’s going to be the main challenge.”

Confidence within the sector about its progress over the next year far outstrips other regions around the world, according to a recent report by construction industry analysts Procore

“Our region is not putting its foot on the brakes, irrespective of the macroeconomic headwinds and political instability,” says Madeleine Skillen a, marketing manager there. “This, for me, is a declaration.

“More than half of businesses expect projects to expand by 20 percent over the next 12 months. This is incredibly positive, a declaration for the growth that we expect over the coming years.” 

Latest articles

B8KRCP The Bank of England underground Gold Vaults in London Stacks of Gold Bars are taken into storage Gold bars are taken into storage at the Bank of England;central banks around the world are increasing reserves

UAE increases gold reserves with growth set to continue

The UAE’s gold reserves reached almost AED20 billion ($5.5 billion) at the end of March, rising 12.6 percent year on year, with expectations that the growth will continue into the rest of the year. The Central Bank of the UAE (CBUAE) said the Gulf state’s reserves of the precious metal have risen considerably over the […]

Construction workers in Manama. 'There is plenty of office space in Bahrain and the occupancy rates even in the better buildings are not that high,' says one real estate expert

Extra supply casts big shadow over Bahrain’s real estate sector

The completion of a raft of developments in Bahrain has dampened hopes for strong growth in its real estate sector this year.  A flurry of activity at the end of 2023 led some analysts to predict stronger growth this year, after a period of low-single-digit increases or dips in prices, rents and deals. In 2023, […]

Shell Aramco LNG

Shell beats Aramco in race to buy LNG business

Saudi Aramco, the world’s biggest oil exporter, has lost out to UK rival Shell in its bid to buy Pavilion Energy, a Singapore trader of liquefied natural gas (LNG), from Temasek, the Asian island nation’s sovereign investment fund. Both companies were shortlisted for a potential acquisition worth billions of dollars. No financial details of Shell’s […]

The UAE, which is keen to embrace new technologies, ranked second for employment and third for international trade World Competitiveness Ranking

Saudi Arabia and UAE up in World Competitiveness Ranking

Saudi Arabia and the UAE have improved their rankings in the annual IMD World Competitiveness Ranking this year, as both Gulf states embrace artificial intelligence (AI) to make their economies more productive. The list, which is compiled by the International Institute for Management Development (IMD) in Switzerland, saw the UAE rise three places to seventh, […]