Meed | Riyadh’s rapid expansion comes with challenges

Riyadh’s rapid expansion comes with challenges

31 July 2023

Commentary
Colin Foreman
Editor

Read the August 2023 MEED Business Review

Riyadh is changing fast. Once regarded as an insular city surrounded by desert at the centre of the Arabian Peninsula, the Saudi capital today is making waves on the global stage as it seeks to establish itself as one of the world’s top 10 largest city economies by 2030.

The city is already the largest in the GCC, with a population of 7.5 million people, but that is not enough for the kingdom’s determined leadership. The plan is for that total to double to 15 million by 2030.

Ensuring the city does not become overpopulated requires massive investment in new infrastructure. Officials have alluded to $1tn of investment in the capital before 2030.

Riyadh’s future project pipeline includes ambitious ventures such as the world’s largest modern downtown developed by New Murabba Development Company, and King Salman International airport, which is planned to become the world’s largest in terms of passenger capacity.

Heightened project spending will have a marked effect on Riyadh’s construction sector, which is already exhibiting signs of stress. In 2022 alone, a record $12.2bn of contracts were awarded. This reflects progress and growth, but still falls significantly short of the total required to achieve the city’s 2030 goals.

Rising costs and scrambling to find resources are nice problems when considering the alternative

As with any rapid expansion, there are challenges involved. Companies in Saudi Arabia are already warning that Riyadh’s construction market is nearing capacity, and competition for resources is intensifying, leading to inflation in project costs. Those pressures will ramp up further if Riyadh is successful with its bids to host Expo 2030 and football’s World Cup 2030.

Rising costs and scrambling to find resources are nice problems when considering the alternative. After nearly a decade of subdued project activity in Saudi Arabia, the opportunity to work on large-scale projects in the capital is a welcome change.

Saudi Arabia plans $1 trillion capital