Saudi construction contract value surges to $51bn in 2022

The construction sector continued its growth during 2022 as the value of awarded contracts returned to pre-pandemic levels, according to a report by the US-Saudi Business Council (USSBC).


The value of awarded contracts during the fourth quarter surged to SR71.5 billion ($19.1 billion), accounting for 37% of the year’s awards, stated the report.


According to the council, this marked the highest value of awarded contracts in a quarter in nearly seven years when the value surged to hit SR88.1 billion ($23.6 billion) for the first quarter of 2015. 


The remarkable growth during Q4 brings the total value of awarded contracts in 2022 to SR192.4 billion ($51.3 billion), thus reflecting a 35% increase over 2021. 


The USSBC Contract Awards Index (CAI) climbed to 241.71 points in Q4 ending the year above the 200-point mark in 11 out of the 12 months in 2022 following its recovery during the second half of 2021. 


The CAI grew by 52.92 points (28%) QoQ while also growing by 32.66 points (16%) YoY. The resurgence in awarded contracts on the back of numerous giga-projects fueled the surge following the pandemic induced slow down that hampered the construction sector. 


The CAI grew to 257.07 points in October, remained steady in November at 256.80 points, before finishing December at 241.71 points.


On the Saudi real estate sector, the USSBC said its surge of SR38.9 billion ($10.4 billion) in awards from 33 contracts during Q4 turned it into the highest grossing sector by quarter in 2022. 


This growth was fuelled by the residential real estate market, which grew by SR25.3 billion ($6.7 billion) and by a significant SR27.6 billion ($7.4 billion). 


This, it stated, was the largest tally by quarter for the residential real estate market since Q1 2015 when it reached SR33.2 billion ($8.9 billion). Overall, the real estate sector grew by SR26.4 billion ($7 billion) or 210 percent QoQ during Q4 and increased by SR31.4 billion ($8.4 billion) or 415 percent YoY. 


For the year, the real estate sector achieved the highest tally in awarded contracts with SR63.1 billion ($16.8 billion), which was SR42.2 billion ($11.3 billion) or 202% greater than 2021, said the report. 


It also marked the second highest annual tally on record following 2015, which attracted SR96 billion ($25.6 billion). The real estate sector accounted for 33 percent of the total value of awarded contracts during 2022, it added.


On the power sector, the Council said it rebounded during Q4 after witnessing 20 contracts worth SR16.4 billion ($4.4 billion) 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 SR16.6 billion ($4.4 billion). 


The power sector grew by SR13.8 billion ($3.7 billion) QoQ and SR4.3 billion ($1.1 billion) or 36 percent YoY. For the year, the power sector garnered the third highest value of awarded contracts by sector with SR30 billion ($8 billion), which was SR383 million or 1 percent higher than 2021.


It marked the highest annual tally since 2015, which reached SR31.7 billion ($8.5 billion). The power sector accounted for 16 percent of the total value of awarded contracts during 2022, said the report.


On transportation, USSBC said the sector maintained its position as a top contributor during Q4 as it awarded SR6 billion ($1.6 billion) on 16 contracts. Neom was the most active awarder of contracts as it continues to develop its transportation network including tunneling, dredging, and earthworks. 


Leading multi-project developer Red Sea Global and Qiddiya Investment Company (QIC) also contributed with several sizeable contracts during the quarter.


The transportation sector declined by SR18.9 billion ($5 billion) or 85% QoQ but grew by SR780 million ($208 million) or 30% YoY. 


For the year, the transportation sector received the second highest value of awarded contracts with SR38.6 billion ($10.3 billion), which was SR29.1 billion ($7.8 billion) higher than 2021. 


It marked the third highest tally on record after 2013 and 2011, which had accumulated SR105.8 billion ($28.2 billion) and SR65 billion ($17.3 billion), respectively. The transportation sector accounted for 20% of the total value of awarded contracts during 2022.


The Tabuk region registered the highest tally of awarded contracts at it attracted SR27.4 billion ($7.3 billion) or 38% of the total, it stated. 


As per the Council report, Saudi futuristic city Neom accounted for a majority of the contracts as it awarded SR25.7 billion ($6.9 billion) or 94% of all contracts during the quarter. 


The Saudi futuristic city contract awards were in the real estate and transportation sectors. The remaining SR1.8 billion ($468 million) or 6% 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 SR13.8 billion ($3.7 billion) or 19% of the total. The real estate sector accounted for the highest share of Riyadh’s contracts with SR8.7 billion ($2.3 billion) or 63% of the total. 


According to the Council, the transportation sector attracted the second largest share of Riyadh’s awarded contracts totalling SR1.6 billion ($438 million) or 12%, while the remaining 25% of the awarded contracts came from the healthcare, industrial, power, water, and oil and gas sectors. 


The Makkah region rounded the top three regions by awarded contracts with SR12.7 billion ($3.4 billion) or 18% of the total. The power sector’s two contract awards accounted for SR9.8 billion (77%) of the total. 


Meanwhile, the real estate sector captured the second highest value of awarded contracts in Makkah with SR1.8 billion ($493 million) accounting for 15% of the total. 


The remaining 8 percent of awarded contracts were distributed between the transportation, military, industrial, and water sectors, it added.


Albara’a Alwazir, the Director of Economic Research at US-Saudi Business Council, said: "The surge in contract awards continues unabated on the back of a growing economy that was fueled 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," he added.-TradeArabia News Service





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