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Top five Saudi construction trends to watch in 2018

Construction activity is expected to record steady growth in Saudi Arabia next year as global oil prices rationalise and the kingdom prepares for long-term economic growth. 

Private-sector growth is also being encouraged in the kingdom, which is expected to launch a $19bn (SAR72bn) programme to support housing construction as well as fee waivers for small businesses next year, Commerce and Investment Minister Majid Al-Qasabi said. 

According to Arabian Business, the package, part of a four-year stimulus programme, contains 17 separate initiatives the government hopes will result in direct and indirect job creation, Al-Qasabi said.

It is a key component of the kingdom’s Vision 2030 economic-transformation plan ahead of the 2018 budget due next week.

1. Increased public-sector investments

In addition to the $19bn stimulus package, Saudi Arabia's sovereign wealth arm, the Public Investment Fund (PIF), is investing billions of riyals to ensure future growth and security for the kingdom's economy.

PIF is led by the Crown Prince of Saudi Arabia, Mohammad Bin Salman. 

From property development to energy services' provision and waste management, PIF has recently made investments in various companies to diversify Saudi's revenue and service streams. 

These investments, coupled with numerous others, are expected to raise the value of PIF's assets under management (AUM) to $400bn (SAR1.5tn) by 2020.

2. Alternative financing models

Alternative financing options, including real estate investment trusts (REITs) and public-private partnership (PPP) platforms, are likely to find takers in the kingdom next year.

Saudi Arabia has the highest value of PPPs in the region, according to a joint report published by Jones Lang-LaSalle (JLL) and DLA Piper.

The country's PPP sector reportedly has a total investment value of $42.9bn (SAR160.9bn) spread across 18 projects. 

In a statement this November, JLL revealed that PPPs are increasingly being used as a platform to encourage more private-sector engagement in different sectors in the country, including real estate.

The report, titled Public Private Partnerships: A new approach to Financing Real Estate Development in KSA, points to PPPs as a key component of the country’s National Transformation Programme (NTP), which aims to increase the percentage of private sector investment from 40% of GDP in 2016 to 65% by 2030.

Up to 10 new real estate investment trusts (REITs) could be launched in Saudi Arabia by the end of this year, an expert told ConstructionWeekOnline this August.

Stephen Flanagan, partner and head of valuation for Knight Frank’s Middle East and North Africa operation, said these estimates were based on the rate of REIT growth in the kingdom.

He explained: "REIT growth in Saudi Arabia is very rapid, [and] Knight Frank is currently working with a number of investment houses and REIT managers on the process of forming or launching different type of REITs in the kingdom.

"These REITs are diverse, with asset classes being focused on including retail, offices, hotels, and education.

"We estimate there could be another five to 10 REITs launched before the end of 2017 in Saudi Arabia."

3.Digital 'transformation' underway

Saudi Arabian construction firms are said to be targeting a "digital transformation" in 2018, a year that would prove to be the "tipping point" for tech to be incorporated in building operations.

Ahead of the Saudi Build Expo show held this October, experts said companies in the kingdom would look to adopting technology as an efficient method of completing the country's construction pipeline, which is expected to be worth $47.5bn (SAR178bn) in 2018.

This development is supported by the Saudi Vision 2030 and the National Transformation Program 2020 initiatives, which entail the development of rail, airport, and seaport projects. 

4.Improved engineer employment criteria

Expatriate engineers with less than five years of experience will no longer be recruited in Saudi Arabia starting January 2018, according to the Saudi Council of Engineers.

Engineering companies involved in urgent projects have been given a three-month deadline to terminate the contracts of inexperienced engineers who applied for recruitment before the decision, local daily Saudi Gazette reported this October.

The agreement, reached in August, makes it mandatory for expatriate engineers to undergo a professional test and a personal interview to ensure that they are familiar with the profession and its specialisation.

5.Market expansion

Saudi Arabian companies are likely to explore a market expansion across the Middle East as construction activity increases in the region, especially in anticipation of Expo 2020 Dubai.

This December, Saudi-based real estate developer Dar Al Arkan launched its first international project with a $218m (AED800m) Roberto Cavalli-designed residential development in Dubai.

Located in Business Bay, the I Love Florence 34-storey high-rise tower will offer one-, two-, three-, and four bedroom apartments as well as penthouse views of the Dubai Water Canal.

This will be the first time the Roberto Cavalli fashion brand will lend its name to a real estate development anywhere in the world, providing interior fit-outs, and signature designs.

Earlier this month, a façade provider that is part of Saudi's Al Rajhi Building Solutions Group (ARBSP), was named for Sail Tower project in Jeddah. 

UAE-headquartered Cladtech International, a civil engineering and construction company, won Al Saad General Contracting Company's contract to manufacture and install curtain wall façades for Sail Tower.

Overlooking the Red Sea, Sail Tower is a 60-storey building that will comprise 242 luxury hotel rooms, 104 serviced apartments, and parking spaces for 600 cars upon completion. 

 

Source: www.constructionweekonline.com

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