KINGDOM OF SAUDI ARABIA

QUARTERLY UPDATE – JANUARY 2020

PROPERTY &
CONSTRUCTION
Saudi Arabia’s PMI declined to 56.9 in the final quarter of 2019,
recording the lowest reading in 5 months with a slight fall in new
export orders resulted in subdued growth in overall new orders.
The employment index also declined, which indicates stagnant
growth within the private sector, coupled with price pressures
remaining muted.

Although it was an unfavourable end to 2019 for Saudi Arabia, the

average PMI reading for 2019 stood at 57.1 recording highest reading
since 2015. The main drivers to this accelerated growth include
structural reforms and expansionary fiscal policy.

Going into 2020, IMF forecasts healthy economic growth of 2.2%.

However, the recent attacks on oil facilities and increased regional
instability adds uncertainty in the near-term outlook. Overall, the IMF
predicts growth in the region to rise as oil GDP revenue stabilizes and
a solid momentum in the non-oil sector continues.

Source: Emirates NBD, International Monetary Fund, December 2019

Tender price inflation within the Kingdom
of Saudi Arabia is currently tracking in the
range of 2-3% and we expect this range to
be maintained moving into 2020.
Beyond mid-2020 through into 2021, as the
pace of construction begins to pick up, it
is envisaged that tender price inflation will
gradually increase to levels that are within
the range of 5-6%, driven by a number of
factors including the giga city developments,
which are an integral part of the Vison
2030. Throughout the first half of 2019, we
witnessed building costs beginning to move
in an upward trend with the strongest growth
forecasted for Saudi Arabia’s capital city
Riyadh. Due to a rapidly expanding population,
the Government is heavily committed to
improving the country’s infrastructure, which
along with the giga city developments will
help drive construction activity beyond 2020.
The construction sector is currently
expatriate reliant and projects will be weighed
down by the increased costs for labour, higher
transportation costs as a result of significant
construction activity in locations outside
of the main logistic hubs and increased
demand of raw materials. With procedural
reforms such as Public Private Partnerships
legislation which encourages international
investment within the Country and the new
government tender and procurement law,
which includes flexibility in raw material prices,
customs duties/taxes, the government is
aiming to ensure a wider participation by
small and medium-sized enterprises by
giving them priority over larger competitors
and exempting them from providing initial
guarantees. This will attempt to limit large size
enterprises from dominating the market and
ultimately driving up tender prices.

For a more comprehensive review of the Kingdom of Saudi Arabia Property and Construction Market,
please contact the editors via bi_middleeast@aecom.com aecom.com/sa
GCC CONTRACTS AWARDED AGAINST OIL PRICE
GCC PIPELINE
US$ Bn

25
US$/bl
90 OF PROJECTS
20
80

70
OR UNDERWAY
As of December 2019
60
15
50

40
10
30 Kuwait (8%)
Bahrain (2%)
20 $250bn
5 $75bn
10 Oman (6%)
0 0
UAE (29%) $166bn
$887bn GCC
Oct-16

Oct-17

Oct-18

Oct-19
May-17

May-18

May-19
Dec-16

Dec-17

Dec-18

Dec-19
Jun-16

Jun-17

Jun-18

Jun-19
Feb-17

Feb-18

Feb-19
Aug-16

Aug-17

Aug-18

Aug-19
Sep-16

Jan-17

Sep-17

Jan-18

Sep-18

Jan-19

Sep-19
Nov-16

Nov-17

Nov-18

Nov-19
Apr-17

Apr-18

Apr-19
Mar-17

Mar-18

Mar-19
Jul-16

Jul-17

Jul-18

Jul-19
Qatar (8%)

GCC Total (US$ Billion) OPEC Basket Price Source : MEED Projects, OPEC
PROJECTS $237bn

BUSINESS ACTIVITY
Purchasing Managers Index
Saudi Arabia (47%)
65 50=no change $1,415bn
60
56.3 56.9
55
50
May-18

May-19
Dec-17

Dec-18

Dec-19
Nov-17

Nov-18
Aug-18

Nov-19
Aug-19
Mar-18

Mar-19
Sep-17

Sep-18

Sep-19
Oct-17

Oct-18

Oct-19
Jan-18

Jan-19
Feb-18

Feb-19
Jun-18

Jun-19
Apr-18

Apr-19
Jul-18

Jul-19

45
40
Source : MEED / AECOM December 2019
KSA Global Composite PMI Source : JPMorgan

REGIONAL BUILDING COST COMPARISON

Building cost (US$/sqm) UAE (Dubai) KSA (Riyadh) Qatar (Doha) Bahrain (Manama)
Typology Low High Low High Low High Low High
Residential
Low rise 950 1,450 500 800 1,300 1,600 800 1,350
Medium rise 1,000 1,550 950 1,200 1,600 1,850 1,050 1,600
High rise 1,500 2,200 1,200 2,100 1,900 2,150 1,450 2,000
Villas 1,100 2,200 N/A N/A 1,400 2,700 650 1,350
Commercial
Low-rise office (shell & core) 1,100 1,400 700 1,100 1,300 1,600 1,050 1,450
Mid-rise office (shell & core) 1,250 1,800 1,050 1,450 1,600 1,950 1,200 1,600
High-rise office (shell & core) 1,500 2,200 1,250 1,900 1,900 2,300 1,450 2,050
Fit out — basic 950 1,500 700 950 1,300 1,800 650 950
Fit out — medium 1,500 1,900 950 1,250 1,700 2,200 950 1,200
Fit out — high 1,950 2,500 1,250 1,650 2,000 2,750 1,200 1,600
Retail
Community 1,300 1,550 700 950 1,200 1,450 1,050 1,350
Regional mall 1,350 1,650 900 1,300 1,300 1,750 1,200 1,600
Super regional mall 1,500 1,900 1,250 1,600 1,300 2,000 1,450 1,850
Industrial
Light duty factory 750 950 650 850 900 1,050 800 1,050
Heavy duty factory 900 1,100 800 1,000 1,050 1,300 950 1,200
Light industrial unit 650 750 600 900 750 900 650 950
Data center — Tier 3 (based on AED/kW(IT)) 19,650 22,450 18,700 21,450 21,150 24,100 N/A N/A
Hotel
Budget 1,700 1,900 1,350 1,650 2,500 2,650 1,550 1,800
Mid market 2,000 2,600 1,650 2,250 2,700 3,650 1,650 2,250
Up market 2,700 3,500 2,100 2,650 3,700 4,400 2,100 2,650
Resort 3,200 3,700 2,650 4,000 4,100 4,950 2,500 3,350
Car parks
Multi storey 550 800 550 650 812 950 450 650
Basement 850 1,200 800 950 886 1,050 650 1,000
Other
Schools - primary, secondary academy 1,350 1,700 800 1,350 1,613 2,200 1,400 1,800
Healthcare - district hospital 2,200 3,200 1,950 2,750 2,350 3,500 2,500 3,050
Exchange rate to 1 US$ AED 3.67 SAR 3.75 QAR 3.64 BHD 0.37

Note: All costs are based on Q4 2019. No investment or other business decision should incorporate the rates in the above
For typology definitions, inclusions and exclusions see pages 100 and 101 table without first contacting AECOM for further information / clarification.
of the Middle East Property and Construction Handbook 2020 - aecom.com/sa Influence of foreign exchange fluctuations, unique site conditions, design attributes
and applicable tariffs must be considered when comparing actual projects.
Relative costs are based on an average across all sectors.