REGIONAL OVERVIEW
Middle East
MIDDLE EAST
Growth and strategic change in the face of adversity
Middle Eastern construction demand continues to be shaped and strengthened by long-term national transformation programmes. At a critical moment for the region since the outbreak of the conflict in the Iranian gulf, these vision-led projects offer welcome consistency.
Especially in the Kingdom of Saudi Arabia (KSA) and the United Arab Emirates (UAE), strategic investments in infrastructure, tourism, entertainment and digital capability are sustaining a strong pipeline of activity and allowing investors, developers and contractors alike to focus on the long-term potential, seeing beyond the temporary volatility.
Our data in this report was collected before the recent conflict in the gulf, so should be reviewed in that context, but it remains instructive as to the key regional drivers and comparative construction costs.
BREAKDOWN DATA
TOP PERFORMING SECTORS
Sports, leisure and hospitality
Residential and social housing
Major mixed-use development
Strategic reviews refocus programmes
One of the clearest shifts in the Middle East is that major spending is being channelled into specific projects within long-running programmes which serve greater immediate strategic purposes.
In KSA, this is visible across the wider Vision 2030 portfolio, where priority schemes including Diriyah, Qiddiya, NEOM (Oxagon) and King Salman International Airport form part of a broader effort to diversify the economy, develop tourism, enhance mobility, strengthen logistics and improve quality of life.
Global host city events underpin current confidence
At the same time, milestone events such as Expo 2030 Riyadh and the FIFA World Cup 2034 (held in KSA) are helping to anchor delivery timelines and maintain momentum around hospitality, transport and public realm investment. This is driving competition in tendering conditions in the Saudi capital, as of the time of preparing this report. The average price to build in the Riyadh market is at US$2,874.0 per m².
Regional conflict is slowing tendering awards
There is also a growing gap between planned pipeline activity and immediate-term project awards as clients and contractors navigate the current market volatility. Tendering conditions remain hot, with a large number of opportunities coming to market - especially in Doha, Riyadh and Cairo. However, there is greater caution around finalising investment decisions and awarding final contracts as the impact of conflict remains uncertain.
Continued demand meets labour constraints
In large part due to these landmark investments and vision-led programmes, the current disruption means that major projects already underway are still progressing. These are still drawing heavily on labour, specialist trades and supply chains, particularly in KSA’s giga-project ecosystem and across major UAE infrastructure and real estate programmes.
General labour supply is meeting current demand, but our survey identified emerging shortages of specialist skills, particularly for mechanical, electrical and plumbing capabilities. This is a common trend across the region, but is a particularly acute challenge in Dubai , where there is a significant shortage, projected to tighten further over the next 12 months. This limited capacity is sustaining rising costs in the Emirate – where average construction costs have reached US$1,990.0 per m², and 2026 inflation is set to be 5.0%.
Procurement uncertainty is changing how projects are priced
- Methods of procuring materials in the face of increasing uncertainty poses another significant challenge for clients.
- Lead-times for critical development components such as transformers, escalators, elevators and generators often surpass 12 weeks, according to our survey. This is likely to lengthen in the context of local disruption.
- Contractors are increasingly cautious about accepting the risk of fixed-price contracts when material costs, shipping conditions and programme assumptions can shift quickly.
The impact of the conflict in the Iranian Gulf
- Disruption around the Strait of Hormuz has highlighted how exposed the region remains to freight volatility, war-risk insurance and delays to imported materials.
- The conflict in the gulf has attracted global attention onto how much domestic digital infrastructure exists in the region. We are seeing this strengthening interest from governments and investors in building more data centres to bolster local data sovereignty. Significant investment is already being directed to major initiatives such as HUMAIN in KSA and G42 in the UAE.
- There is growing emphasis on strengthening national resilience and domestic capabilities throughout the Middle East, particularly for ports and rail, to enhance trade capacity and mitigate disruption.
- A slowdown in tourist activity is prompting the hospitality sector to pursue a wave of refurbishment opportunities, as operators take advantage of lower occupancy levels to upgrade assets. This should underpin a rapid bounce back when the conflict ends.
We are seeing some projects, often linked to new developers in the market, pause as the region responds to economic and geopolitical disruption. Inflationary pressures, and risk mitigation, leading to elevated pricing for certain materials is the primary reason behind such decisions. In certain sectors, such as build to sell residential, are also facing downward pressure on revenues as confidence in the regional market has lowered and investors take a more cautious approach.
On the horizon
For clients, the key issue in the Middle East is how to balance the incredible long-term opportunities with the shorter-term risks.
The secure pipeline of projects remains deeper than in many other corners of the world. However, delivery is becoming more selective, procurement more sensitive, bids more competitive and supply chain risk harder to ignore. This is particularly evident in the Kingdom of Saudi Arabia where major development priorities are shifting from vision to implementation and execution.
It is a region where partner selection and commercial flexibility are becoming decisive differentiators. Clients that understand where investment is genuinely being prioritised, and that respond to market signals with pragmatism and agility rather than rigidity, will be best placed to secure capacity, manage risk and turn long-term regional ambition into successful project delivery.
AUTHOR
Mark Hamill, Regional Real Estate Lead, Middle East
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