Construction Sector Optimistic with High-Value Pipeline-2024

Curious about the future of construction in the MENA region and the UAE? With growing pipelines and ongoing investments in the UAE and Saudi Arabia, there's much to explore. The region's construction sector is resilient and focused on diversifying economies to meet the needs of the rapidly expanding population and reduce economic reliance on limited and unstable fossil fuels. The largest segment of construction is transportation infrastructure and real estate development, including social infrastructure like schools and hospitals, to support the existing and expanding populations.

The MENA region anticipates an impressive $3.9 trillion total value of unawarded construction projects. The UAE claims a significant share at 15%, with its construction industry forecasted to expand by 4% in real terms in 2024 and 4.2% in 2025, supported by developments in infrastructure, energy and utilities, and residential construction projects. The industry is expected to register an annual average growth of 3.8% from 2026 to 2028, witnessing an extraordinary boom driven by mega projects and governmental initiatives. The UAE government's latest budget, which includes an AED 64.1 billion allocation for 2024 along with investment through public-private partnerships (PPP), is expected to further support the construction industry's output. The outlook is promising as the government continues with its infrastructure plans through various initiatives, ensuring a high-value pipeline of upcoming projects and developments.

Construction Costs and Materials

Focusing on the material cost, oil prices are expected to average $81 per barrel in 2024 and moderate further in 2025, while base metal prices are predicted to drop by 5% in 2024 according to the World Bank report. Also, Construction costs are heavily affected by shipping and transportation prices, especially since many materials like glazing, facade systems, and timber are imported. From March 2023 to March 2024, freight shipping costs rose significantly, exceeding $3,000 per 40-ft container, up from $1,800. Despite this, material availability remains stable, and local manufacturing is expected to improve in the medium to long term. The World Steel Association predicts a 1.9% growth in global steel production in 2024 after a 1.6% decline in the previous year, driven by increased steel demand in the MENA region due to large projects and housing needs.