The Middle East is experiencing a construction surge driven by ambitious government-backed giga-projects, according to a report by Turner & Townsend, a global professional services company. This large-scale investment spree, coupled with falling inflation and economic diversification efforts, is attracting international talent and propelling the region's growth. However, the report also highlights a potential roadblock:the immense strain these mega-developments are placing on supply chains.
The Turner & Townsend International Construction Market Survey (ICMS) 2024 pinpoints Saudi Arabia as a primary driver of the construction boom. The Kingdom's giga-projects, along with rising demand, are pushing construction costs upwards. The influx of talent and resources required for these projects is stretching the capacity of supply chains across the entire Middle East.
Doha, Qatar, ranks as the second-most expensive construction market in the region, with a cost per square meter of $2, 096. However, the report predicts a softening in construction cost inflation in Doha, dropping from 3. 5% in 2023 to a projected 2. 5% in 2024. This trend is attributed to a decline in construction activity following the infrastructure build-up for the 2022 World Cup, with investment and skilled labor shifting towards Saudi Arabia's giga-projects.
Dubai, another major player in the region's construction scene, boasts an average construction cost of $1, 874 per square meter. While Dubai is likely to benefit from the overflow of talent and investment from Qatar, it remains to be seen how the emirate will navigate the potential supply chain bottlenecks arising from the broader regional surge.
The ICMS report underscores the multifaceted impact of giga-projects on the Middle East. While these large-scale endeavors generate significant economic activity and attract foreign investment, they also expose vulnerabilities in regional supply chains. Addressing these bottlenecks will be crucial to sustaining the current investment boom and ensuring the successful completion of these ambitious development plans.