Middle East markets offer strong cost-to-build value
The region remains a ‘bright spot’ in an otherwise challenging global construction scenario according to Turner & Townsend
Leading Middle East markets continue to experience high growth in construction activity, as the region invests in nation-building agendas that support economic diversification away from fossil fuels, according to Turner & Townsend.
The Kingdom of Saudi Arabia leads the region in new project opportunities and government commitment to major infrastructure investment, with average cost-to-build in Riyadh now reaching at $2,379 per sqm. Conversely, the Doha market is cooling after its unprecedented World Cup programmes.
The survey also shows that the region has been less affected by the supply chain disruption and softening growth seen in other key markets.
Turner & Townsend pointed out that the Middle East presents a relative bright spot in a challenging global construction market, with many other regions experiencing high costs and inflation, as well as critical labour shortages. In fact, the data reveals that 74.2% of global markets show a strong ‘skills shortage’.
From a survey of 89 global cities, the US dominates the rankings of the most expensive places to build, with six US cities in the top ten. New York is the most expensive market, with an average build cost of $5,451 per sqm and San Francisco following closely behind on $5,200 per sqm.
According to ICMS, the most expensive location to build in the region is Doha, with an average cost of $2,588 per sqm. Yet as mentioned, the Doha market is now cooling, with the rate of cost inflation easing from 8.0% in 2022 to 3.5% in 2023. By comparison, costs in Riyadh rose by 10% during 2022.
Turner & Townsend forecasts that costs will continue to rise by 7.5% during 2023 as the Kingdom of Saudi Arabia sees unprecedented investment in new ‘giga-projects’ as part of the country’s ambitious Vision 2030 programme.
The UAE is seeing stable conditions, with an average cost escalation of 4.0% over 2022 and 2023 in Abu Dhabi and 5.0% in Dubai. Hot markets for the UAE include luxury development, including for tourism, as well new infrastructure and improved public realm, stated the report.
A major milestone for the country, and the wider region, is the COP28 conference which will take place later this year. Turner & Townsend’s report identifies the increasing prioritisation of sustainable building practices to reduce carbon emissions and protect water resources across the region.
While the development outlook for the Middle East is buoyant, Turner & Townsend has warned that capacity and resource will need to be carefully coordinated to avoid risks to project delivery and offset growing competition for labour.
Mark Hamill, the Director and Head of Middle East real estate and major programmes at Turner & Townsend noted, “The Middle East remains a hub for investment, with some of the most ambitious infrastructure and development programmes anywhere in the world. With strong pipelines and government-backing, these nation-building agendas are set to transform the region over the next decade.”
