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Riyadh was named the most expensive city in the region in which to build real restate, with costs running as high as USD 2.6k per square meter as the capital city continues to expand at a breakneck pace, according to the 2024 International Construction Market Survey (ICMS) report (pdf) by global consultancy firm Turner & Townsend.
In global context: The report also ranks the Kingdom as the 19th most-expensive city in which to build in globally.
By the numbers: For high rise CBD offices in Riyadh, prestige locations average SAR 790 (USD 211) per square foot (sqft) in building costs, while A-Grade CBD offices average around SAR 651 per sqft. Construction for educational buildings range from SAR 836-SAR 1k per sqft. Resort style hotels cost around SAR 1.9k per sqft to build, while five-star luxury hotels average SAR 1.7k per sqft and three-star hotels around SAR 790 (USD 211). Residential building costs average from SAR 604-743 per sqft.
A “standout story”: Turner & Townsend described the Kingdom’s construction boom as a “standout story” across the region. It said the Kingdom “has seen remarkable investment as both domestic and foreign funds look to capitalize on state-backed initiatives such as Neom and the Government’s wider 2030 vision.” It also attributed the growth in demand to the regional headquarters programs and the hosting of several major global events, including Expo 2030 and the 2034 Fifa World Cup.
The catch: The Kingdom continues to face a shortage of the skilled labor, according to the report — competition for skilled workers is among the factors keeping prices high, Tuner & Townsend suggests. Labour costs in Riyadh were generally higher than in Dubai across multiple skilled trades:
- Group 1 tradesmen (plumbers and electricians) earn SAR 45 per hour in Riyadh, while in Dubai they earn the equivalent of SAR 24.49 per hour,
- Group 2 and 3 (carpenters and tilers) earn SAR 38 per hour in Riyadh, compared to Dubai’s equivalent of SAR 22.45 per hour.
And higher material costs: Concrete blocks cost SAR 6.9k per thousand in Riyadh versus AED 3k in Dubai, while reinforcement bars cost SAR 3.8k per tonne in Riyadh compared to AED 2.5k per tonne in Dubai.
Construction cost inflation in Riyadh will cool to 5.0% y-o-y in 2024 and next year, down from 7.0% last year 2023. Dubai’s construction cost inflation is set to stay steady at 5.0% this year before dropping to 3.0% in 2025, while Doha’s building cost inflation will average 2.5% this year before rising to 3.0% next year.
IN CONTEXT- Doha was the second-most expensive city for construction regionally, averaging USD 2.1k per sqm, followed by Dubai at USD 1.9k per sqm.
