Saudi construction output value forecast to reach $181.5bn in 2028: Knight Frank

Riyadh city

Saudi Arabia’s construction output value for all sectors is forecast to reach $181.5bn by the end of 2028, putting the Kingdom as the largest world’s largest construction market, according to a recent report by Knight Frank.

Saudi Arabia is experiencing a significant surge in its construction activities, with the construction output value for the residential, institutional, infrastructure, industrial, energy & utilities and commercial sectors reaching $ 141.5bn, up by 4.3% compared to last year.

The residential sector primarily dominates Saudi Arabia's construction output value, accounting for 31% ($ 43.5 billion) of the total output value in 2023 and projected to reach $ 56.9 billion by 2028, according to Knight Frank’s analysis. The energy and utilities sector follows closely in second place, with a value of $ 35.1 billion, which is forecast to increase to $ 46.5 billion by 2028.

Notably, 38% of the existing contract award value accounts for Riyadh Province, equating to US$ 54bn, followed by Mecca and Tabuk Provinces at US$ 28.7bn and US$ 28.5bn, respectively. While construction sector contract awards account for 61% of the total value, the transportation sector follows in second place at 33%, highlighting the significant investment being made in bolstering the capital’s transportation infrastructure as the population swells to a projected 10 million by 2030, Knight Frank said.

Knight Frank has also published an analysis of residential construction costs across Saudi Arabia which outlines the range of building construction and fixed fit-out costs across different residential categories, including different tiers of villas, and the same for apartment buildings.

Having analyzed construction rates per square metre for various residential projects in Kingdom, Knight Frank’s data reveals that the variance in construction costs is primarily attributed to the unique differences in the scale, quality and type of construction projects, ranging from SAR 3800-10,000 sqm. Using the lower end of this range as well as the data on average dwelling size, Knight Frank’s analysis suggests that the cost to deliver the Kingdom’s planned 660,000 homes by 2030 will cost at least $ 175 billion.

Nationally, the planned volume of residential units has risen to 660,000 units, an increase of 30% in the last 12 months. Meanwhile, the office pipeline is steady at 6 million square meters. In the commercial market, plans are currently underway for 5.3 million square meters of retail space and an additional 320,000 hotel rooms, which will contribute to Saudi Arabia's objective of growing the population to 40 million and accommodating 150 million visitors by 2030. This figure has increased from approximately 106 million visitors last year, including 27 million international visitors, a 62% increase from the previous year.

According to Knight Frank's analysis, there are currently 25 Giga projects that are at various phases of construction around the Kingdom, with Western Saudi Arabia remain a focus of development with plans valued at $ 692 billion, accounting for 55% of the total $ 1.25 trillion development plan. The region is expected to see extensive growth in luxury residential supply and hotel accommodation, as well as retail, and office space.

This substantial investment in transforming the Kingdom is at the heart of Vision 2030 and will also strengthen the Kingdom’s position as a global hub for tourism, commerce and trade.