The Saudi construction sector saw a massive increase last year as the value of awarded contracts returned to pre-pandemic levels.
The total value of awarded contracts in 2022 hit SR192.4bn ($51.3bn), last year according to a report by the US-Saudi Business Council.
Real estate was the biggest sector for construction spending, while NEOM was the region with the most investment.
Saudi construction boom
The figure represents a 35 per cent increase over the previous year.
The value of awarded contracts during the final three months of last year surged to SR71.5bn ($19.1bn), accounting for 37 per cent of the year’s awards.
It marks the highest value of awarded contracts in a quarter in nearly seven years when the value reached SAR88.1bn ($23.6bn) in the first quarter of 2015.
Saudi real estate construction contracts
The real estate sector’s surge of SR38.9bn ($10.4bn) in awards from 33 contracts during Q4 of 2022 was the highest grossing sector by quarter in 2022.
The growth was fuelled by the residential real estate market, which grew by SR25.3bn ($6.7bn) or 637 per cent quarter-on-quarter and by a significant SR27.6bn ($7.4bn) or 1,721 per cent year-on-year.
This was the largest tally by quarter for the residential real estate market since Q1 2015 when it reached SR33.2bn ($8.9bn).
Overall, the real estate sector grew by SR26.4bn ($7bn). For the year, the real estate sector achieved the highest tally in awarded contracts with SR63.1bn ($16.8bn), which was SR42.2bn ($11.3bn) or 202 per cent greater than 2021.
The real estate sector accounted for 33 percent of the total value of awarded contracts during 2022.
Saudi power construction
The power sector rebounded during Q4 2022 after witnessing 20 contracts worth SR16.4bn ($4.4bn) being awarded.
The resurgence was mainly attributed to a sizeable contract by ACWA Power related to the Shuaibah 2 solar PV power plant and marked the largest contract award in the power sector during 2022.
This was the largest tally by quarter for the power sector since Q2 2014, which reached SR16.6bn ($4.4bn).
The power sector grew by SR13.8bn ($3.7bn). For the year, the power sector garnered the third highest value of awarded contracts by sector with SR30bn ($8bn), which was 1 per cent higher than 2021.
The power sector accounted for 16 per cent of the total value of awarded contracts during 2022.
Saudi transportation construction
The transportation sector maintained its position as a top contributor during Q4 2022 as it awarded SR6bn ($1.6bn) on 16 contracts.
NEOM was the most active awarder of contracts as it continues to develop its transportation network including tunnelling, dredging, and earthworks.
Red Sea Global and QIC also contributed with several sizeable contracts during the quarter.
The transportation sector declined by SR18.9bn ($5bn) or 85 per cent quarter-on-quarter, but grew by SR780m ($208m) year-on-year.
For the year, the transportation sector received the second highest value of awarded contracts with SR38.6bn ($10.3bn), which was SR29.1bn ($7.8bn) higher than 2021.
It marked the third highest tally on record after 2013 and 2011, which had accumulated SR105.8bn ($28.2bn) and SR65bn ($17.3bn), respectively.
The transportation sector accounted for 20 percent of the total value of awarded contracts during 2022.
Saudi contract awards by region in Q4 2022
The Tabuk region registered the highest tally of awarded contracts at it attracted SR27.4bn ($7.3bn) or 38 per cent of the total.
NEOM accounted for a majority of the contracts as it awarded SR25.7bn ($6.9bn) or 94 per cent of all contracts during the quarter.
NEOM’s contract awards were in the real estate and transportation sectors.
The remaining SR1.8bn ($468mn) or 6 per cent in contracts were awarded by Red Sea Global, SEVEN, and Tabuk Municipality also across the real estate and transportation sectors.
The Riyadh region captured the second highest value of awarded contracts with SR13.8bn ($3.7bn) or 19 per cent of the total.
The real estate sector accounted for the highest share of Riyadh’s contracts with SR8.7bn ($2.3bn) or 63 per cent of the total.
The transportation sector attracted the second largest share of Riyadh’s awarded contracts with SR1.6bn ($438m) or 12 per cent.
The remaining 25 percent of the awarded contracts came from the healthcare, industrial, power, water, oil and gas sectors.
The Makkah region rounded the top three regions by awarded contracts with SR12.7bn ($3.4bn) or 18 per cent of the total.
The power sector’s two contract awards accounted for SR9.8bn ($2.6bn) or 77 per cent of the total.
Meanwhile, the real estate sector captured the second highest value of awarded contracts in Makkah with SR1.8bn ($493mn) or 15 per cent.
The remaining 8 per cent of awarded contracts were distributed between the transportation, military, industrial, and water sectors.
Albara’a Alwazir, Director of Economic Research at the US-Saudi Business Council, said: “The surge in contract awards continues unabated on the back of a growing economy that was fuelled by significant oil revenues and the acceleration of giga-projects following the COVID-19 slowdown.
“Furthermore, the private sector’s increasing contribution to the Kingdom’s diversification strategy is aiding in the rebound of the construction sector to pre-pandemic periods.”
Oil GDP’s year-on-year growth of 15.3 per cent in 2022 was the highest since 2003, when it reached 17.4 per cent.
The windfall in oil revenues strengthened the Kingdom’s position to support the funding of national diversification strategies while accelerating the development of its non-oil sector.
The private sector’s contribution to GDP reached an all-time high in 2022 as it accumulated SR1.2tn ($325bn), growing by 5.3 per cent year-on-year.
These developments supported construction sector GDP as it grew by 4.5 per cent, the highest rate since 2014 when it reached 6.6 per cent.
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