Jeddah Economic Company (JEC) was formed for the express purpose of developing Kingdom City, a prime real estate project that will host both commercial and residential developments, including hotels and offices.

The centrepiece is Kingdom Tower, planned as the tallest building in the world at 1,008 metres. To make this project a reality, JEC’s principal financier, billionaire investor Prince Alwaleed bin Talal’s Kingdom Holding Company, assembled a group of heavyweight Saudi backers to co-invest in JEC.

These include Abrar Holding Company, owned by Samaual Bakhsh; Qila’a Jeddah Company, owned by Abdulrahman Hassan Sharbatly; and Jeddah-based giant construction firm Saudi Binladin Group. This has furnished JEC with assets that carry a book value of nearly SR9bn ($2.4bn).

Urban development

Alongside the 500,000-square-metre Kingdom Tower, Kingdom City will cover 5.3 million sq m of new urban development to attract business and tourism. In total, the project is expected to cost SR75bn, with Saudi Binladin’s construction contract for the tower alone valued at SR4.6bn.

Kingdom Tower was designed by US firm Adrian Smith & Gordon Gill, and construction is due for completion in 2018. In February 2013, a joint venture of the UK-based EC Harris and Mace was awarded the project management contract to oversee the development of the building.

The first phase of development will cover 1.4 million sq m and will include the tower, a mall and a large mosque for 12,000 worshippers, together with other residential and commercial buildings.

JEC’s aim is to reposition Jeddah as a modern Arabian metropolis equal to the likes of Dubai, Cairo and Beirut – playing on its historic heritage but adding in modern facilities, including entertainment, education, residential and health services. It will have features such as district cooling, green mobility and water optimisation. Unlike King Abdullah Economic City, situated a long way from Jeddah, it is closer to the historic heart of the city at Obhur, north of the centre.

Collaborative effort

JEC sees the venture as an essentially collaborative effort. In October, it signed a memorandum of understanding (MoU) with Engie and Suez to provide key services and power to the Kingdom City project.

JEC’s aim is to reposition Jeddah as a modern Arabian metropolis equal to the likes of Dubai, Cairo and Beirut

The MoU specifies that the companies will work together to develop a roadmap for the provision of solutions in five specific areas: water and waste management; power generation and supply; city infrastructure and facilities management; green mobility; and district cooling.

Progress has been swift since construction work commenced in April 2013, with JEC in early 2015 taking delivery of one of the biggest and tallest custom-made cranes, supplied by Germany’s Liebherr & WolffKran.

Despite the business benefits that will accrue in Jeddah as a result of JEC’s activities, there is also a sense that the Kingdom City is a personal project of its principal backer, Prince Alwaleed, to outdo rivals such as Dubai with a tower even higher than the iconic Burj Khalifa. Reportedly one-third of Kingdom Tower’s $1.2bn construction bill has already been spent on ‘soft costs’, including design.

Office sector

Despite some concerns that the Kingdom City scheme does not have a viable business plan, its targeting of the office real estate market may make sense. Rental rates in Jeddah have held up this year, and real estate consultancy JLL says the city’s office sector continues to show strong health. The limited increase in office space has kept vacancy rates across the market relatively stable at 7 per cent in the third quarter of 2015, the lowest of any of the major office markets in the Middle East and North Africa region.

Financing is expected to be completed with a syndicated loan arranged with Saudi banks. Reports last year suggested JEC was in talks to use the local Alinma Bank as an advisor and lender. Another mooted option is to offer shares in JEC to the public via a flotation.