(MENAFN- Mid-East)
$101 billion worth of projects were awarded in the MENA region in the first half of 2023
Between 2024 and 2027, the construction market size in Egypt, Saudi Arabia, and the UAE is likely to witness a projected growth of 9%, 4%, and over 3%, respectively.
Defying global economic challenges, the Middle East and North Africa (MENA) region's construction sector continued to demonstrate strong performance with a total of $101 billion worth of projects awarded in the first half of the year, reveals JLL's latest Construction Market Intelligence report, which is based on insights gathered from industry sources and experts.
The largest share of the project value, approximately 67%, came from Saudi Arabia ($44 billion) and the UAE ($23 billion) with both markets recording an increase compared to the same period last year. Although Egypt experienced a decline in the value of awarded projects in the first half of this year as compared to the same period last year, the country has a robust pipeline of upcoming projects.
In the UAE, the residential sector stood out as the strongest with over $9 billion worth of awarded projects and Dubai alone accounting for approximately 75% of the total value. In addition, both Saudi Arabia and Egypt awarded projects worth $5 billion and $771 million in the sector, respectively. Besides residential, the hospitality and mixed-use segments also emerged as prominent sectors, with KSA's leisure projects contributing $2 billion.
The combined estimated value of the project pipeline in the MENA region exceeded $3 trillion with Egypt, Saudi Arabia, and the UAE collectively owning over 60% of it. The Kingdom led the charge with an approximately 35% share, translating to an anticipated value of $1.3 trillion, while Egypt and the UAE both have an estimated value of $500 billion each.
Laura Morgan, Market Intelligence Lead MEA at JLL said:“While global interest rate hikes, high levels of inflation and a sluggish trade recovery continued to impact the construction industry globally, the region stood out as an anomaly showcasing a sustained growth trajectory. With an impressive project pipeline surpassing $3 trillion, led predominantly by nations like the UAE, Saudi Arabia, and Egypt, the construction sector promises more than just stability in the forthcoming period. It is slated to exhibit enduring growth, remaining the cornerstone of economic development and diversification in the MENA region.”
Pertaining to the size of the construction market, GlobalData paints an optimistic outlook for Egypt indicating a projected 9% growth (AAGR) between 2024 and 2027, supported by transportation, renewable energy, and residential sectors. While in 2022, Egypt's residential sector emerged as the strongest, currently it holds the second-highest value of construction project awards as of H1 2023.
Saudi Arabia's construction market size, on the other hand, is poised for 4% growth (AAGR) between 2024 and 2027 driven by ongoing economic diversification efforts rooted in the Saudi Vision 2030. Notable projects like ROSHN's SEDRA, Jeddah Central, and Diriyah Gate Development Authority's Diriyah, as well as initiatives by the Public Investment Fund such as Oxagon, THE LINE, Sindalah island, Trojena, and other residential and tourism projects, continue to progress swiftly, with the building and construction sector contributing 6% to the GDP, making it the second-largest non-oil sector in the country, according to the Chairman of the Saudi Contractors Authority (SCA).
The UAE's construction market size is expected to grow by over 3% (AAGR) between 2024 and 2027, primarily fuelled by increased investment in the infrastructure and real estate sectors, including residential, hospitality, mixed-use, and commercial real estate. Emirates NBD research implies that Dubai's construction index strengthened to 55.1 in June 2023, marking the highest reading in four years.
When it comes to commodity prices, regional and global demand in addition to increased input costs have continued to exert inflationary pressure on it, leading to a spike in Q4 2022 and Q1 2023. That said, signs of stabilising were witnessed in the first half of 2023, with declines observed in aluminium (-15%), iron ore (-13%), copper (-7%), and Brent crude oil (-38%). Construction prices in the MENA region remain balanced against domestic and international economic factors, making the expectation of declining or stabilising prices uncertain.
Furthermore, the forecast for the average oil price in 2023 is $85/barrel, which is $15 lower than the price in 2022 and can potentially lead to reduced fuel and production costs, presenting an opportunity for cost savings in production and transportation. However, it is important to note that project investment in oil-producing regions, such as the Middle East, is often linked to oil price levels. Stable oil prices ideally create a favourable environment for construction projects. Conversely, oil price shocks can impact construction funding in economies heavily reliant on oil revenues.
Regarding tender price inflation, an average annual percentage change of 3% is estimated in the UAE. This increase is attributed to market factors associated with fluctuations in commodity and construction material prices. However, when it comes to the Kingdom, it is slated to experience an average annual increase of approximately 6% in 2023.
Looking ahead to 2024, tender price inflation will be approximately 2% in the UAE considering the stabilisation of commodity prices from the second half of 2023, the projected value of the project pipeline aligned with future demand, and intelligence gathered from market sources.
About JLL:
For over 200 years, JLL (NYSE: JLL), a leading global commercial real estate and investment management company, has helped clients buy, build, occupy, manage, and invest in a variety of commercial, industrial, hotel, residential and retail properties. A Fortune 500 company with annual revenue of $20.9 billion and operations in over 80 countries around the world, our more than 103,000 employees bring the power of a global platform combined with local expertise. Driven by our purpose to shape the future of real estate for a better world, we help our clients, people and communities SEE A BRIGHTER WAYSM. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll
About JLL MEA:
Across the Middle East and Africa (MEA) JLL is a leading player in the real estate and hospitality services markets. The firm has worked in 35 countries across the region and employs over 1650 internationally qualified professionals across its offices in Dubai, Abu Dhabi, Riyadh, Jeddah, Al Khobar, Cairo, Casablanca, Johannesburg and Nairobi.
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