This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 1/22/2020

Overview
The government of the Kingdom of Saudi Arabia’s priorities are shaping trends in architecture and design in the Kingdom. The government continues to invest heavily in infrastructure development as it moves to diversify its economy and respond to the needs of a young, growing population seeking employment opportunities in a diversifying economy. Despite budget deficits and lower oil prices, Saudi Arabia’s construction sector remains strong as the country builds the infrastructure necessary for its “new economy” model based on knowledge industries, local manufacturing and capacity building of the Saudi labor force.

Economic cities are the foundation of the country’s strategy plan to diversify into new-generation economic sectors like healthcare, life sciences, automotive, information technology, logistics, alternative energy and advanced manufacturing. These cities are massive construction projects that require urban planners, civil engineers and project management services. In addition to government initiatives, the market for architectural design is driven by regional competition and the status that bold and innovative designs confer status.

The Kingdom’s goal to decrease dependence on petroleum is generating demand for more energy-efficient building designs.  The Kingdom is becoming a regional leader in this area. It is estimated that 68% of electricity consumption in Saudi Arabia is utilized for air conditioning. The Saudi Green Building Forum (SGBF) was recently established as the country’s official organization in charge of promoting sustainable construction. The U.S. Green Building Council’s LEED rating system is recognized in projects in Saudi Arabia and SGBF is the sole authorized Education Delivery Partner for LEED. There are currently at least sixteen certified LEED projects in Saudi Arabia, including King Abdullah Financial District, the world’s largest LEED-registered project, and King Abdullah University of Science and Technology, the world’s largest LEED Platinum project. Standards are being developed for “green” construction as well as building materials, appliances, electronic systems and HVAC applications, with U.S. building codes increasingly being adopted by Saudi standards bodies.

Saudi Arabia is also investing in its domestic talent pool of architects, urban planners and construction project managers through academic programs in architecture, planning and design at King Saud University, King Fahd University, King Abdulaziz University and King Abdullah University of Science and Technology.

The construction sector in Saudi Arabia declined during 2015–2018 due to low oil prices, which led to the implementation of various austerity measures by the government.  Reduced public expenditure coupled with weak investor confidence led to a decline in construction activity. The industry is expected to experience slow growth during 2019, as oil prices stabilize. The industry is expected to gain momentum from 2020, however, supported by a probable rise in oil prices and a gradual improvement in economic conditions.  The government’s effort to diversify the economy to reduce its dependence on the oil sector is also expected to bode well for the industry over the forecast period (2019–2022). In April 2016, the government launched the Vision 2030 program, under which it aims to increase the share of non-oil sector revenues.

In July 2019, The Red Sea Development Company (TRSDC) awarded Saudi Amana Contracting a public tender award to build accommdation and offices for staff and laborers working on on the project. It also awarded Netherlands-based Archirodon a contract to construct a 3.3-kilometer crossing to Shuraurah, the hub Island for the first phase of developmnet. TRSDC states that the project is on track for completion by the end of 2022. The plans include 14 luxury hotels offering 3,000 rooms across five islands and two inland resorts. It will also include a yachting marina, entertainment facilities, an airport, and the necessary supporting logistics and utility infrastructure.    

The private sector has kept growth in the construction business steady as Saudi Arabia’s overall economic growth slowed in 2016.  In real terms, the Saudi Arabian sector output contracted by 1.6% in 2018, following average annual growth of 1.9% during the preceding four years 2014-2016. This decline was mainly due to low oil prices and the country's high fiscal deficits, which reduced the government's budget spending. The country's construction industry is expected to contract further in real terms in 2019 by 0.4%, before regaining growth momentum. Growth over the forecast period (2019–2023) is expected to be supported by government stimulus on developing transport infrastructure, educational, healthcare, energy and utilities facilities, and affordable housing across the country. Under the National Transformation Program (NTP) 2020 and the Saudi Arabia Vision 2030, the government plans to develop sea ports, railway lines, airports and manufacturing facilities, with an aim to reduce the country's dependency on the oil sector and reduce unemployment. Saudi Arabia’s continued economic growth has keep the construction industry strong.  The large budget indicates that Saudi Arabia is expecting significant revenue growth in the years to come.  The Vision 2030, NTP 2020 and private-sector-investment boost, and ongoing reforms, are likely to aid growth for Saudi’s construction market in 2018 and beyond.  According to an official at the Ministry of Finance, Saudi Arabia’s economy is entering a post-oil era in which the Kingdom’s mega-cities, which are under construction, will provide the country’s future growth.

Sub-Sector Best Prospects
Target sectors holding high potential for U.S exporters include: master planning, regional design and urban planning; project management, interior design; urban port re-development and related design of boardwalks, corniches, buildings, retail space and parks; hospitals and healthcare architecture; hospitality; transportation infrastructure facilities including airports and seaports; architecture and engineering services for mixed-use projects; sports and entertainment complexes; and educational facilities and college campuses.

Opportunities
Transportation Infrastructure
Upgrades to airports are in various stages of the tendering process, including expansions to the major airports in Riyadh and Jeddah. Several major rail projects are in the pipeline and contracts have yet to be awarded for the design of the Saudi Land Bridge that will connect ports on the Red Sea to ports in the Arabian (Persian) Gulf. Saudi Arabia is also part of a GCC regional rail initiative that is currently in the design phase and that will connect passenger and freight traffic in the six countries of the GCC through a 1,400-mile rail network.

Economic Cities
The $500-billion NEOM city project is a 26,500 square kilometers (km) (10,230 square mile) zone that will focus on industries including energy and water, biotechnology, food, advanced manufacturing and entertainment. The Saudi government, the PIF, and local and international investors are expected to invest more than half a trillion dollars into it in the coming years. The first phase of the project is expected to be completed by 2025.  Also, there are six economic cities in various stages of development located across the Kingdom in urban areas surrounding Tabuk, Medina, Rabigh, Hail, Jazan and Eastern Province. King Abdullah Economic City (KAEC) is the flagship Economic City located north of Jeddah. Completion dates for some of these cities are as far out as 2035 and will thus generate long-term opportunities for urban planners, design engineers and project managers.

Housing/Residential Infrastructure
The government recently announced a national housing strategy to build more than 1.5 million new homes at a cost of almost $80 billion to address the shortage of affordable housing for Saudi citizens. Housing and small business are major beneficiaries of the Saudi government’s $19-billion stimulus package.  Among the measures announced in a decree by King Salman are a $6-billion initiative on subsidized loans to provide housing, a $4-billion injection into new building technologies, and a proposal valued at $3 billion to support the funding of infrastructure initiatives. 

Entertainment
The government officially allowed public movie theaters to return to the Kingdom for the first time in more than 30 years in March 2018. Opening cinemas is anticipated to act as a catalyst for economic growth and diversification. By developing the broader cultural sector, it will create new employment and training opportunities, as well as enrich Saudi Arabia’s entertainment options. By 2030, there are projected to be over 350 cinemas with more than 2,300 screens.
Al-Qiddiya Entertainment City: The City is 40km form the national capital city, Riyadh, with phase one of the project expected to be complete by 2022. Total investment in the project will be about $30 billion. The Public Investment Fund (PIF) will inject initial investments into the prject and start partnerships with international companies.  
Red Sea Beach Tourism Project: Saudi Arabia wants to turn hundreds of kilometers of the Red sea coastline into a global tourism destination as part of its plan to transform the economy and reduce its reliance on oil. The project will cover more than 50 islands and 34,000 square kilometers between the cities of Umluj and Al Wajh. Total investment in the project is expected to be about $60 billion.

Souq Okaz City: Work has begun on a massive Saudi heritage tourism project in Taif, that will eventually cost more than $2.5 billion, nearly 90 percent of it invested by the private sector.  The new city will have heritage centers, museums, recreational facilities, open markets, hotels, environmental camps, shopping malls, hospitals, medical centers, business centers, a social club, international schools, health clubs, sport facilities areas, tourist accommodation and a convention center.     

Web Resources

  • Saudi Green Building Forum: www.saudigbf.org
  • Ministry of Housing.  www.housing.gov.sa
  • The Saudi Council of Engineers: www.saudieng.sa
  • Saudi Railway Organization: www.saudirailexpansion.com; www.saudirailways.org
  • Ministry of Municipal and Rural Affairs (MOMRA): www.momra.gov.sa
  • Ministry of Defense www. mod.gov.sa
  • Ministry of Interior: www.moi.gov.sa
  • Ministry of Education: www.moe.gov.sa
  • Ministry of Energy, Industry & Mineral Resources www.meim.gov.sa
  • Aramco:  www.aramco.com
  • Royal Commission for Jubail & Yanbu:  www.rcjy.gov.sa
  • Saudi Arabian General Investment Authority: www.sagia.gov.sa
  • Public Investment Fund: www.pif.gov.sa


 

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