CONSTRUCTION MARKET OVERVIEW
Experiencing significant growth
The construction market in KSA is experiencing significant growth, driven by Vision 2030's focus on diversification and substantial investments in giga-projects. The market is projected to expand from US$ 70.33 bn in 2024 to US$91.36bn by 2029, with a CAGR of 5.37 percent (Mordor Intelligence).
Source: Mordor Intelligence
Given the scale and complexity of Saudi Arabia’s giga-project pipeline, completing all planned construction by 2030 presents significant challenges. As a result, resources are being strategically concentrated in priority sectors such as hospitality, sports, leisure, entertainment and residential to align with Vision 2030 objectives and to prepare for major upcoming events like Expo 2030 and the FIFA World Cup 2034.
There is a surge in housing, infrastructure (metro/rail, roads, airports), and new entertainment and sports venues, including plans for world-class stadiums, transport expansions, and 185,000 additional hotel rooms ahead of FIFA World Cup Saudi 2034TM.
Efforts to bolster local supply chains include forums, MoUs, and long-term partnerships to address material and labour shortages. Likewise, modern construction methods, offsite manufacturing, and collaborative contracting are being adopted to enhance efficiencies.
Investment and pipeline
In 2024, KSA led the GCC region with US$ 144.3 bn in contract awards, a 22.3 percent increase from the previous year. This growth reflects the momentum behind the National Investment Strategy (NIS), which aims to enhance the investment climate and attract greater foreign direct investment (FDI).
Central to this strategy is the government’s push to diversify the economy and reduce reliance on oil revenues, primarily through giga-projects financed by the Public Investment Fund (PIF). A suite of new investment laws, regulatory reforms, and tax incentives, such as allowing full foreign ownership—has further improved the Kingdom’s appeal to global investors. As a result, FDI saw a notable uptick in the second half of 2024. In Q3 alone, foreign investment rose by 37percent to US$4.26 bn, largely due to reduced capital outflow, though this figure was still 24 percent lower than the same period in 2023.
Tourism and real estate are key sectors driving this transformation. As of 2024, the Kingdom had 255 active tourism infrastructure projects, supporting its target of attracting 150 million annual tourists. At the same time, the energy sector remains a vital pillar of the economy. Between 2024 and 2026, Saudi Aramco is set to deliver 99 major projects spanning oil and gas, petrochemicals, pipelines, civil works, and marine infrastructure.
Contractor landscape
The contractor landscape in KSA features a blend of local giants and international players, all contributing to the Kingdom's Vision 2030 development goals. To meet the ongoing demand driven by giga-projects, the government is actively pursuing strategic partnerships with international contractors and investing in local firms to grow market capability.
In this competitive market, contractors and subcontractors have matured over the past five years, embracing advanced technologies like BIM and prefabrication to improve efficiency and project management. They too are engaging in strategic partnerships to secure large-scale projects.
Construction trends
Digital construction, giga projects, sustainability, and workforce localisation are driving major shifts in KSA’s construction sector, including:
- Close to US$1 tn in real estate and infrastructure investment is planned as part of Vision 2030 (Knight Frank), with public-private partnerships (PPPs) gaining momentum; The Riyadh Metro, one of the largest urban transit systems globally, has been developed with substantial private sector involvement. Similarly, the Jeddah Airport Expansion project is enhancing Jeddah's status as a major gateway through a PPP model.
- Strategic partnerships with international firms and PIF-backed local contractors are scaling up delivery.
- Technology is transforming delivery models. BIM, AI, IoT, modular construction, and 3D printing are improving speed, accuracy, and real-time oversight. Projects like NEOM are integrating AI and IoT to create smart, sustainable environments. Most in-kingdom clients are investing in digital transformation to drive improvements.
- Sustainability is rising on the agenda, with more projects adopting international frameworks like LEED and the Saudi Green Building Forum (SGBF), implementing solar integration, and adopting low-carbon and sustainably sourced materials to ensure energy efficiency and environmental protection, though fewer than half currently exceed local building codes.
- The push for localisation is accelerating, with the Nitaqat programme targeting 25 percent Saudisation in engineering roles and driving investment in upskilling to support a more tech-savvy workforce.
Understanding the challenges
In KSA’s construction market, several challenges significantly impact project timelines and feasibility. Inflated costs of construction and skilled labour shortages are among the most critical issues, causing substantial delays and budget overruns. Difficult contractual and legal conditions, along with excessive materials lead-in times, also have a high impact, further complicating project execution.
Medium-impact factors include government red tape, bureaucracy, delayed approvals, difficulties accessing credit, tight credit conditions, low workplace productivity, inefficient work practices, political instability, and trading tariffs. These issues contribute to decision paralysis, stalling progress and affecting project schedules.
Figure 2:
Market challenges and impacts
While increasing contractor insolvency, lack of confidence in the market, economic instability, net zero commitments, market oversupply, and excessive competition have little impact, they still add to the overall complexity of the construction landscape.
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