Saudi Arabia is the fastest growing economy in the region. It is the largest oil producer in the Gulf Cooperation Council (GCC) and accounts for almost 11% of the world’s oil production. Saudi Arabia has enjoyed three years of strong growth driven by rising oil revenues. High oil revenues have stimulated massive project spending in the past. In addition, the Saudi Arabian government has taken important steps to improve the business environment. Saudi Arabia’s Architectural Construction and Engineering continues to maintain its charm even in times of global recession and declining property markets. The existence of enduring demand fundamentals rather than mere speculation activity, heavily favors the growth of Saudi Architectural Construction and Engineering market. We expect the sector to continue its growth trajectory between an average annual rate of 5% to 7% till 2012.
Saudi Arabia, the largest GCC economy, maintains an expanding economic outlook even during the current recessionary times. The country has also maintained its focus on economic diversification. Saudi Arabia is believed to have projects in excess of SR2.0 trillion (US$500bn) currently underway. Although the Kingdom may be selective in announcing further projects during 2009, project spending is expected to keep pace beyond 2010. Saudi Arabia being one of the largest construction markets in the Middle East is estimated to have the total real estate investments of around US$300 billion, which is expected to cross US$400 billion mark by 2010. With one of the highest population growth rates in the region coupled with an increasing flow of local and foreign workforce to participate in the growing economy.
With minimal exposure to the global financial conditions and strong reserves built up during the recent oil boom, the Kingdom of Saudi Arabia presents an expanding economic outlook indicating growth in commercial, retail and industrial segment. An estimated current industrial land of more than 1,500 mn sqm is expected to grow by more than 50% as industrial estates under economic cities, and other designated regions are expected to be developed over next 5 to 10 years. The industrial area of 17mn sqm in King Abdullah Economic City is expected to be developed over the next 2 to 3 years, with further addition of around 50 mn sqm in this city alone by 2015.
The Saudi government is also gearing up to meet the residential, health, education and recreational needs of its rapidly growing population. Over 2 million new housing units will be needed, with over 600,000 for Riyadh alone. Ministry buildings, tourist developments and recreational facilities need sophisticated products and finishing materials.
Real estate and construction development is mainly driven by the following: strong local population growth which is expected to double in the next 20 years; the demographic and structural shifts in the economy; the increasing transparency of laws and regulations attracting foreign investment; the new mortgage law; and, the affluence of the commercial sector. As a result, six mega economic cities are currently being developed and are expected to be home to 4 to 5 million residents by 2020.
By Ishtiaq Hussain