Gigaproject activity enters full swing

14 September 2023
PIF-backed masterplans dominate Saudi Arabia’s construction sector activity

This package on Saudi Arabia’s construction sector also includes: 

Infrastructure projects support Riyadh’s logistics ambitions
Neom briefs Trojena Ski village contractors
Roshn and China Harbour sign $2.06bn housing deals
Seven selects Taif entertainment hub contractor
Joint venture wins Qiddiya hotel construction deal
Sedco prepares to award The Point project in Abha


Saudi Arabia’s construction projects market is projecting a dynamic growth trajectory, primarily fuelled by progress on the kingdom’s gigaprojects programme.

With seven years to go until the 2030 finishing line, Saudi Arabia’s Vision 2030 gigaprojects are entering their main construction and delivery phases.

As a result, the kingdom was the Middle East and North Africa’s most active construction projects market for the third year running in 2022, with nearly $22bn-worth of construction contracts awarded.

This was also an increase of 44 per cent from the $15.2bn signed in 2021, making it the sector’s third consecutive year of growth.

This heightened project award activity continued in the first half of 2023, with $10.3bn in construction contracts awarded, a considerable leap from the $6.2bn awarded in the first half of 2022.

Gigaproject-led awards

Awarded contracts included several big schemes, with four of the top five contract awards linked to gigaprojects backed by Saudi Arabia’s sovereign fund, the Public Investment Fund (PIF).

The largest was a $1.9bn contract for packages A, B, C, D and E of the Riyadh Sports Boulevard’s Zone 6, which went to the local contractor Almabani.

Next was a $1.1bn contract for two clusters of Neom community villages. The local Nesma & Partners won the contract for the project, which is being developed on a public-private partnership (PPP) basis.

An $800m contract was signed in February for Oxagon port’s package 16C, involving dredging and building a quay wall. Neom awarded this contract to the Dutch Royal Boskalis Westminster, Belgium’s Besix and the local Modern Building Leaders.

Roshn has also made progress in implementing the first phase of its community homes programme in the eastern province of Hofuf, awarding a $500m contract to Saudi-based contractor Al-Kifah Contracting.

The only non-PIF contract award among the top five awarded in the first half of this year came from Umm al-Qura for Development & Construction Company to build package B of the Hilton Garden Inn Masar in Mecca. The $650m contract was awarded to the local contractor Saudi Baytur.

Upcoming schemes

PIF-led schemes likewise dominate Saudi Arabia’s roster of upcoming construction projects.

In February, Saudi Arabia revealed plans to develop the world’s largest modern downtown in Riyadh. Named New Murabba, the scheme is nearly five times the size of Dubai’s downtown, which now spans 2 square kilometres and was built at an estimated cost of AED73bn ($20bn).

PIF is also considering plans for a 2-kilometre-tall tower as part of an 18 sq km masterplanned development to the north of Riyadh. The proposed tower is more than double the height of the world’s tallest building, Dubai’s Burj Khalifa.

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Saudi Arabia is, meanwhile, planning major new real estate developments in the Neutral Zone that it shares with Kuwait. The planned projects could cost $5bn-$8bn and involve constructing a central resort on the Gulf coast, flanked by other hotel beach developments, retail and commercial areas, and about 10,000 residential units.

Jeddah Central is another upcoming scheme being developed on a 5.7 sq km site, comprising 17,000 residential units and 2,700 hotel keys, an opera house, a museum, a sports stadium and an oceanarium.

Projects pipeline

The pipeline of known proposed and planned construction projects in Saudi Arabia totals about $908.8bn, with $29.2bn of projects in bidding and about $880bn-worth of work in design and study.

Amid subdued activity elsewhere in the broader GCC construction projects market, the kingdom has become the key target market for local and international contractors, with its thousands of project packages in the pipeline expected to drive project spending and opportunities for many years to come.

Saudi Arabia has long been the largest regional projects market in terms of its pipeline, a position it now holds by far, with more than $1.2tn-worth of known planned and unawarded work.

As the activity ramps up in the country, bigger questions remain: How will Saudi Arabia deliver all of these projects and will it have a large enough workforce with sufficient expertise to do so?

PIF recently moved to establish national champions in the contracting sector capable of delivering its giant schemes. The first step in the process came with the investment of $1.3bn in four local construction companies: AlBawani Holding Company, Almabani General Contractors Company, El-Seif Engineering Contracting Company and Nesma & Partners Contracting Company.

Regional and international contractors can also be expected to continue their vital role in supporting the construction pipeline, while PPP structures are likely to expand as the country’s burgeoning project expenditure and need for project financing outstrips the capacity of PIF.

The changes under way in the Saudi construction sector are truly seismic, and all the available assets in the sector and more will need to come together to realise the country’s colossal 2030 project ambitions.

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