Complex Made Simple

Comparing the Saudi and UAE construction markets up to 2026

Saudi's construction market will always surpass in value that of the UAE due to the sheer difference in the sizes of these countries. But with COVID-19 under control, both markets are aggressively pursuing ambitious developments

The kingdom’s mega-cities, which are under construction, will provide the country’s future growth The UAE construction market is expected to reach a value of $133.5 bn by 2026 Countries with the most hotel projects are Saudi with 186 projects and the UAE with 161

Saudi’s construction market will always surpass in value that of the UAE due to the sheer difference in the sizes of these countries. But with COVID-19 under control, both markets are aggressively pursuing ambitions developments.

Saudi Construction 

The Saudi construction market was valued at around $37 billion in 2020 and is expected to register a 5.2% growth rate over the forecast period, 2021-2026.

Prior to the COVID-19 outbreak, it was reported that the infrastructure and construction industry in Saudi Arabia was amongst the largest in the Gulf Cooperation Council (GCC) region, with more than $825 bn worth of planned and unawarded projects. 

The kingdom’s mega-cities, which are under construction, will provide the country’s future growth.

According to the industry sources, more than 5,200 construction projects are currently ongoing in Saudi Arabia at a value of $819 bn. These projects account for approximately 35% of the total value of active projects across the GCC.

The urban construction sector is the largest contributor to the construction sector expansion, with 3,727 active projects valued at $386.4 bn. The utility sector is the second largest contributor with 733 projects worth $95.6 bn, followed by transportation with 500 projects valued at $156.2 billion.

Some of the major urban construction projects in Saudi Arabia include the King Abdullah Security Compounds (Phase 5) and the Grand Mosque (Holy Haram Mosque expansion), each valued at $21.3 bn.

Saudi Arabia’s decision to cease doing business with international companies whose regional headquarters are not based within the kingdom, which comes into effect on Jan 1. 2024, will accelerate economic reform across the GCC, according to a leading Saudi law firm, HMCO.

With a population estimated to be around 15 to 20 million by 2030, the need for infrastructure and construction development will continue to grow.

Suhaib Hammad, Head of Commercial & IP practice, Hammad & Al-Mehdar, said: “The progressive changes, coupled with aggressive targets laid out by the government, is integral to Saudi Arabia’s ambition to increase FDI from 3.8% to 5.7% of GDP by 2030, which will, in turn, stimulate broader economic growth.”

The Saudi Contractor Authority reported that there are approximately 175,000 contracting companies in Saudi, 96.4% of which are small-sized enterprises.  

UAE construction

According to the UAE Construction Cost Insight Report Research by JLL, the UAE’s GDP forecasted growth is 2.1% for 2021.  

It said 2021 started as a challenging year with a decline in the construction industry projects market compared to 2020. Business optimism is improving for the remainder of 2021 and will continue into 2022.  

 

Supported by Expo 2020 and the ‘Projects of the 50 initiative,’ the UAE is set to enter a new growth era of economic and social development.

Metals, which have recently seen prices reach a 10 year high with copper increasing by 89% 4 (May to May) and Iron Ore by 116%, will likely stabilize as economic activity returns to a new post-pandemic norm. JLL anticipates that commodities, especially steel, will decrease from recent highs during the end of 2021 and into 2022.

The UAE construction market was valued at $102 bn in 2020, and it is expected to reach a value of $133.5 bn by 2026, registering a 4.69 % growth over the period of 2021-2026.

The government continues with its infrastructure plans, given various government initiatives such as the Energy Strategy 2050, the Sheikh Zayed Housing Program, and the Dubai Tourism Strategy.
  
The UAE is also focusing on smart city developments, planning to digitize up to 1000 government services and install 2000 wi-fi hotspots in the country. Moreover, liberal trade policies in the country are attracting foreign investors, propelling the construction market there.

In the commercial infrastructure space, Abu Dhabi aims to attract 7.9 million tourists annually by 2030 under the auspices of its Abu Dhabi 2030 Plan. Furthermore, the emirate hopes to expand its retail and office space to 4 million and 7.5 million sqms by 2030. The UAE has about $288 bn of planned construction projects.   

Hotel construction in the region

Countries with the most projects in the construction pipeline in the hotel segment are Saudi with 186 projects/66,866 rooms and the UAE with 161 projects/45,753 rooms. Following distantly is Qatar with 60 projects/15,030 rooms, then Egypt with 57 projects/14,168 rooms, and Oman with 34 projects/6,891 rooms. Dubai continues to lead the construction pipeline in the United Arab Emirates with 121 projects/35,837 rooms.