Saudi Arabia led global construction activity in the first quarter, with a $1.5 trillion pipeline of unawarded projects, according to data analyzed by JLL.
The latest report by the real estate services company reveals that the Kingdom accounted for a 39 percent share of the total construction projects in the Middle East and North Africa region, valued at $3.9 trillion.
Within the Kingdom’s pipeline, the construction assets sector represented 62 percent or $950 billion of the overall projects, while transportation, infrastructure, and other utilities accounted for 38 percent or $582 billion, as noted by JLL citing insights gathered from MEED Projects.
Laura Morgan, market intelligence lead, Middle East and Africa at JLL, said: “Economic growth, burgeoning population, and modernization have made Saudi Arabia the most active player in the Middle East construction market, with the real estate sector leading the Kingdom’s projects market in 2023.”
She added: “The impressive resilience of the sector in the face of global uncertainties points to the success of the Kingdom’s economic diversification strategies.”
JLL report mentioned that the country is set for a potential 2.1 percent gross domestic product growth in 2024 and 5.9 percent in 2025.
It added that Saudi Arabia’s progress on numerous Vision 2030 giga-projects and infrastructure developments ahead of the upcoming EXPO 2030 has “cemented the Kingdom’s position as a leader in construction activity regionally and globally.”
In the report, JLL also maintained a positive outlook for Saudi Arabia despite challenges including inflation, elevated interest rates and geopolitical tensions.
Referring to MEED Projects data, it noted that the Kingdom’s construction sector saw the highest value of awarded projects in 2023, totaling $97 billion, up from $60 billion in 2022.
Morgan emphasized that as market dynamics continuously evolve, the impact of construction costs on the sector’s robust growth cannot be ruled out.
She added that other market constraints, such as a shortage of skilled labor, resource availability, and an overheating market, could place undue pressure on the Kingdom’s construction activity.
Citing the recent Purchasing Managers’ Index released by Riyad Bank in association with S&P Global, JLL observed that companies operating in the construction sector tried to reduce workforce hiring in the first quarter to manage costs and cash flow.
Moreover, the report noted that the lingering shortage of skilled professionals and general labor to keep up with the pace of construction poses a significant risk in Saudi Arabia.
“Despite recent disruptions and supply challenges, JLL’s analysis reveals stable material availability in the first quarter,” said the real estate consultancy.
It added: “Although there is still significant reliance on imported materials like glazing, facade systems, and timber in the local and regional markets, the medium- to long-term outlook indicates improvements in local manufacturing capabilities, stemming from demand generated by major projects in Saudi Arabia.”