MENA economic review
At the end of Q3 2024, the International Monetary Fund (IMF) forecasted the Middle East and North Africa (MENA) region’s GDP to grow by 2.1 percent for the full year 2024. This represents an increase of 0.2 percent on the 1.9 percent figure reported for 2023.
This modest increase in growth is mainly attributable to the gradual resumption of oil production, with the limited growth seen in 2023 resulting from increases in non-oil sector activity. The Middle East encompasses several oil-exporting countries, including Saudi Arabia, the United Arab Emirates (UAE), Qatar, Oman, Bahrain, Iran, Iraq, Syria, Kuwait and Yemen. These countries account for approximately 48 percent of the world’s proven oil reserves and about 38 percent of natural gas reserves. During periods of high oil prices, such as 2021-2022, these countries’ economic outlook became bolstered due to fiscal surpluses, and they became somewhat sheltered from the economic risks attributed to the rest of the world. These fiscal surpluses provide considerable easing in economic recovery; with the current and continued high oil prices at the center of the Middle East’s growth, it allows for greater fiscal flexibility, confidence in investment and the funding of diversification efforts across the GCC member states.
The Middle Eastern oil-importing countries have seen a slowdown in activity but to a lesser extent than that seen in the oil- exporting countries. Egypt’s growth slowed to 2.8 percent in 2024, 0.7 percent lower than the estimate at the start of the year, mainly due to weaker manufacturing activity caused by import restrictions, reduced shipping through the Suez Canal and reduced tourism due to regional conflicts. Tunisia and Morocco have also seen a reduction in activity due to sharp contractions in agricultural production as an ongoing consequence of droughts in 2023, despite relatively robust tourism levels.
Regional challenges such as conflict and slower- than-expected tourism growth suppressed MENA’s economic growth in 2024. Despite this, the outlook for 2025 is positive at 4 percent, with strong growth driven by the expected phasing out of oil production cuts and robust non-oil sector activity, particularly in Saudi Arabia.
The graph below shows the MENA GDP growth rate compared to emerging markets and developing economies. The GDP is also tracked against the overall world economy from 2016 and forecasted to 2029. According to the IMF, the MENA region’s GDP is expected to grow in 2025 and achieve relatively stable growth levels between 2026 and 2029 compared to rates achieved in 2024.
Source: IMF, World Economic Outlook Database, October 2024
Source: IMF, World Economic Outlook Database, October 2024
Source: Haver Analytics, National Sources, Emirates NBD Research July 2024
MENA economic challenges and risks
The MENA region continues to face the same economic challenges and risks as in previous years; however, in 2024, the escalation of geopolitical conflicts has contributed to higher uncertainty in the region’s economic outlook. Ongoing conflicts are suppressing regional growth, and their overall impact will depend on the duration, intensity and spread of geopolitical tensions.
Continued political instability, extreme unemployment, economic uncertainty, economic relief disparity and ongoing geopolitical conflicts all remain challenges to the stability and economic growth of the region. Some of these challenges arise from political developments outside of the region; political uncertainty in the European Union and the United States and the potential escalation of a trade war between major global economies have an impact on regional activity.
The key risks associated with the MENA region include:
Violence, protests and social unrest.
Exporting and importing reliance.
Institutional and social fragility and corruption
and under-employment, especially for youths and women.
Disruption of operations or theft of data or money.
Education and skills gaps.
Extreme weather, rising sea levels, floods and droughts.
New viruses and variants.
Supply chain disruption, low crop yields, water scarcity.
MENA construction market review
The overall outlook for the MENA region’s construction sector remains confident, strengthened by growing pipelines and continued investment in Saudi Arabia and the UAE.
Buoyant and increasing project pipelines across the UAE and Saudi Arabia paint an optimistic market backdrop. These projects are set to be the focus of the region’s construction sector in 2025 and beyond.
The resilience and driving force of the MENA region’s construction sector are focused on the need to develop and diversify their economies, meet the demands of their rapidly growing population and reduce their economic reliance on finite and economically volatile fossil fuels.
Project awards in the Middle East in 2024 exceeded the value of awards in 2023 (based on data to the end of Q3 2024). The figures for 2024 currently represent a new eight-year record for construction activity in the region. When final award values are accounted for up to the end of 2024, they may even exceed a 10-year record set in 2015.
Source: MEED 2024 Q3
Source: MEED 2024 Q3
MENA awarded contracts
The country with the highest value of awarded projects in 2024 was Saudi Arabia, with an approximate total of USD 83.24 billion, up 50 percent from 2023, equating to about 40 percent market share. KSA was followed by the UAE with USD 38.77 billion in project awards, equating to a circa 17 percent market share.
The busiest sector for project awards was gas, which saw a 25 percent share with a value of USD 48.55 billion, followed by power projects at 21 percent, with a value of USD 40.72 billion. Building construction projects came in third with 20 percent, with a value of USD 39.36 billion, followed by oil (14 percent - USD 28.37 billion) and transportation (10 percent - USD 20.25 billion). Water, chemical and industrial projects collectively accounted for the remaining 10 percent of awards.
According to MEED, the cumulative value of USD 228 billion for awarded projects in the MENA region for Q1 to Q3 2024 represented a 13.7 percent increase on the same period in 2023.
Of Saudi Arabia’s USD 83 billion investments this year, USD 12.8 billion was committed to four deals with Saudi Electricity Company (SEC) for combined gas-fired power plants and HVDC converter stations in Riyadh. Additionally, SEC is understood to have an agreement with Egypt’s Orascom and Spain’s Tecnicas Reunidas for power plants in Qurayyah and Ghazlan 2 for USD 3 billion. Energy China won a USD 2.5 billion deal for a plant next to Ghazlan 1. Two solar power plants with a combined value of USD 4.2 billion were also awarded by SPPC’s Renewable Energy Program in Haden and Muyah, each with a 2,000 MW capacity, showing a growing grasp of opportunities for introducing renewable energy to the grid.
According to MEED, the Kingdom is set to award more power infrastructure projects in the coming years. These awards show a concerted effort to meet the rising energy demands of Saudi Arabia, driven by current and future projects and projected population growth in 2025 and beyond. The Kingdom of Saudi Arabia continues to lead the region in terms of the value of contracts awarded.
The UAE continued the trend in power infrastructure contract awards with USD 2.4 billion awarded by Abu Dhabi National Oil Company (ADNOC) to Egyptian contractor ENPPI to build a new oil pipeline from Abu Dhabi to Fujairah, one of several contracts awarded by ADNOC in 2024 as they build on a record USD 22 billion spent on oil and gas projects in 2023.
Despite uncertainty affecting the region from continued conflicts, the outlook for the UAE remains buoyant due to boosted tourism and property purchases since early 2022 following the Ukraine- Russia conflict, increased activity in upstream gas production, reworked metro and rail expansions and the reignition of shelved development projects. The UAE construction sector has seen consolidation in 2024 as government- owned developers have been reorganized or merged, such as the incorporation of Nakheel and Meydan into Dubai Holding Group.
According to a report by Research and Markets, Qatar’s construction market is forecast to have grown by 4.4 percent in 2024. Of the USD 10 billion total contract value awarded in the Sultanate in 2024, gas and oil projects dominate, with USD 4 billion awarded by Qatar Energy for a gas plant at North Field Phase 2 and four contracts with a combined value of USD 4.9 billion awarded at the Al Shaheen Oil Field Ruya Development.
Following the World Cup in 2022, several strategic projects are in Qatar’s pipeline that should provide opportunities for continued contract award value growth in the short term.
Source: MEED 2024 Q1-Q3
Source: MEED 2024 Q1-Q3
Source: MEED 2024 Q1-Q3
Source: MEED 2024 Q1-Q3
In Egypt, project awards were up 56% from 2023 to USD 8.9 billion in 2024.”
In Egypt, project awards were up 56 percent from 2023 to USD 8.9 billion in 2024. The El Nasr Company’s Acid and Fertiliser Production plants, with a combined value of USD 1.8 billion, led the way. Other significant contracts on the Cairo Metro network modernization works totaling USD 1.6 billion also contributed to the country’s market in 2024.
Although Egypt is facing challenges in terms of its economic growth, the country’s construction pipeline remains strong with multiple strategically important projects in development to meet the Government’s vision for 2030.
Despite regional instability and political uncertainty that might otherwise give cause for concern for Iran, Iran surprisingly places third amongst countries excluding KSA and UAE in terms of contract award value in 2024, with USD 16 billion awarded. This is, in fact, one contract for the Pars Oil and Gas Company on the South Pars Gas Field Pressure Boosting Project, awarded in March.
Oman awarded USD 5.5 billion of projects in 2024, up from USD 2.5 billion of projects in 2023, representing a 120% increase”
Oman awarded USD 5.5 billion of projects in 2024, up from USD 2.5 billion in 2023, representing a 120 percent increase. With USD 0.8 billion attributable to the Marsa LNG Terminal and a further USD 1 billion to the Oman Rail - Etihad Rail packages B and C, these three projects dominate the Sultanate’s project award list. Transport projects account for USD 1.8 billion in 2024 for Oman, compared to USD 0.5 billion for oil projects and USD 1.1 billion for gas, highlighting the country’s increased diversification into infrastructure development.
Awards were recorded for Bahrain at a total value of USD 1.4 billion in 2024, which, although modest, still represents a 258 percent increase on the USD 0.39 billion awarded for 2023. Looking across Bahrain’s pipeline of projects, the launch of Bahrain’s USD 30 billion Strategic Projects Plan, which is set to increase the total land area by more than 60 percent and the tendering of USD 3.5 billion King Hamad Causeway project as a public-private partnership shows considerable prospects in the country’s journey to realize its Economic Vision 2030. Furthermore, with Bahrain being a gateway country for business in Saudi Arabia, the significant uplift of activity in Saudi Arabia means that the outlook for the country is expected to remain strong.
MENA construction considerations
Rising material costs and access to financing remain significant factors in the MENA construction market. Although inflationary pressures are under control in most global economies in the second half of 2024, they continue to impact the region which imports much of its goods and materials. While this has been and will continue to be a consideration, so will the opportunity to switch to locally produced materials and simpler, shorter supply chains where possible.
Resilient growth in contract awards has led to increased demand for labor and regional competition for skills. Saudi Arabia continues to draw labor away from the UAE and the wider region, and access to labor remains a key consideration for the sector. According to the RICS, Dubai and Abu Dhabi are reporting skill shortages and project delays that may increase if not addressed in 2025 and the short term.
Despite these potential pitfalls, the region remains a draw for investors in the context of wider geopolitical instability. There are opportunities for significant improvement in the quality of product delivery, margin, and volume. The ability to achieve this will ultimately depend on the region’s attractiveness to headcount, not just investment.
Key considerations
Inflationary pressures are coming under control, but their effect will be felt into 2025 as demand for materials rises with accelerated awards in the region.
Project financing and risk premiums will be key considerations as focus switches from award to delivery.
Access to the skilled labor necessary to deliver according to program will continue to be a concern.
Regional workforce capabilities and skills gaps in delivering the quality required by large projects will increase wages and project costs if not addressed in 2025 and in the short term.
MENA construction: strengths, weaknesses, opportunities and threats
Looking at the key strengths, weaknesses, opportunities and threats for construction in the region reveals many strengths and opportunities to support the buoyancy and growth of the MENA construction market moving into 2025. However, this will be be disproportionate across countries.
Leading into 2025, a continuation of the post-pandemic ‘new normal’ is expected in the region, with opportunities for transparency, trust and a collaborative approach within supply chains and between stakeholders.
The change should begin to see greater cashflow management and improvements to contractual terms and conditions. Some of the key topics leading into 2025, in terms of recovery and mitigating risk in the MENA region, are:
− Capability to deliver complex and bespoke structures. − International input, supply, location and ability to import. − Construction speed. − Reduced bureaucracy. − Cheaper cost of labor. − Diversification and government incentive to invest. − Creating and providing employment opportunities. − Supporting local talent and industries. − Economic value creation.
− Collaboration among industry stakeholders. − Modular construction. − Sustainable construction processes. − International investment. − Environmental Social and Governance funding. − Public-Private Partnerships. − New business markets. − Digital transformation. − New materials and construction techniques. − Encouraging career opportunities for young graduates.
− Payment delays. − Procurement timescales and awarding contracts before design completion. − Resources, transient population and talent gap. − Lack of skilled labor. − Quality issues. − Safety issues. − Carbon emission and environmental impact. − Digitalization and uptake of AI deployment. − Cyber security.
− Continued regional conflicts. − Supply chain disruptions. − Inflation/escalation. − Precedence of contract awards to lowest price. − Communication. − Delay of adopting new technology and missed innovation opportunities. − Misuse of value engineering with a risk to quality. − Market capacity limitations.
MENA construction risk mitigation
In terms of weaknesses and threats, significant challenges remain to the construction market and its successful delivery and recovery. One of the key challenges in 2025 will be the availability and capability of the construction market resources to mobilize and enable project pipelines. Significant resources are required to meet the demands of construction projects in 2025. To facilitate construction and manufacturing capacity, the readiness of the industry’s supply chains and organizations’ ability to retain staff will be pivotal in ensuring successful delivery in 2025 and beyond.
Some of the key factors in terms of recovery and mitigating risk in the MENA region as we head into 2025 are shown below:
MENA construction trends and prospects
Key trends and opportunities in the region include:
With the rapid advancements in AI since 2023, the construction sector is considerably focused on the capabilities and implementation of AI-supported construction methodologies. This includes generative designs, design optimization algorithms, safety and program monitoring and control, autonomous vehicles and equipment, robotic construction, predictive analytics for supply chain management, inspections and defects monitoring, drone surveying, smart buildings, predictive cost models and collaborative project management platforms. Integrating AI in construction is an ongoing process hampered by the sector’s lack of digitalization. Nevertheless, AI can improve efficiencies with reduced cost, improved turnaround times and enhanced safety and sustainability.
Environmental, Social and Governance (ESG) considerations are becoming increasingly important in construction as stakeholders recognize the industry’s significant influence on the environment, society and corporate governance. Investors and financial institutions are increasingly incorporating ESG criteria into their decision-making processes, which has implications for Foreign Direct Investment (FDI) in construction. Investors are showing a preference for construction projects that align with ESG principles; the projects’ perceived environmental and social responsibility may influence FDI inflows. There is also a need for preferential green financing forms such as green bonds and sustainable loans.
Safety is a focal point on all projects for both construction workers and the public. Revised safety regulations will soon be applied to construction equipment and machinery on future construction projects by contractors and developers alike. Maintaining newly adopted safety protocols will be essential in ensuring construction sites remain operational.
The construction industry is gradually adopting digital technologies such as Building Information Modelling (BIM), drones and construction management software to enhance efficiency and reduce costs, while the opportunity to embrace Artificial Intelligence (AI) represents a potential to increase efficiency and reduce costs.
The construction industry is adapting to changing work environments, including remote working and digital collaboration tools. This trend will likely continue to influence project management and communication in the sector.
Governments in the region are increasingly turning to Public- Private Partnerships (PPP) to fund and manage large-scale infrastructure projects. This approach allows governments to seek private sector expertise and investment to develop and manage critical infrastructure projects. PPP projects can further contribute to job creation and stimulate economic activity. The construction phase, in particular, generates employment opportunities, while ongoing operations can contribute to economic growth.
Several cities in the MENA region are embracing smart city concepts. Smart cities involve integrating technology into urban infrastructure to enhance efficiency, sustainability and the overall quality of life for residents. In the UAE, Dubai has its Smart Dubai Initiative, and Abu Dhabi has smart city goals embedded in its 2030 Urban Structure Framework Plan. In KSA, Riyadh’s King Salman Energy Park (SPARK) aims to become a smart industrial city and Jeddah Economic City (JEC) incorporates smart technologies and services. Bahrain’s Vision for Manama has Smart City Components and Egypt has its New Administrative Capital (NAC) Smart Infrastructure.
Non-energy sectors will remain the spotlight across the MENA region’s construction market, with many countries already investing heavily in infrastructure and residential projects to fill the demands of population growth and urbanization. This includes transportation (roads, bridges, airports), energy (power plants), water, residential, commercial and recreational spaces.
MENA region countries are facing economic challenges due to factors like conflicts and fluctuating oil prices. However, there are expectations of economic recovery and investment in construction plays a crucial role in stimulating growth. Many countries in the region have long-term development plans and visions that include substantial investments in infrastructure. These initiatives aim to diversify economies and create sustainable growth.
During the pandemic, contractors had little choice but to pay premium prices for materials and alternative suppliers due to the disruptions caused. As we head into 2025, having learned a great lesson, supply chains will diversify to incorporate additional criteria such as environmental, social, governance and sustainability goals. They will examine resets in current procurement relationships that hope to achieve cost efficiencies. This will present a challenge to suppliers and contractors but also an opportunity for those who recognize it as a true differentiator.
Tender Price Index (TPI)
The TPI is AECOM’s assessment of construction tender prices in the market. It is compiled by AECOM’s Middle East business intelligence team and is based on actual returns of projects.
The index is a measure of average price increases across differing markets, project types and locations. It should be regarded as only a guide when looking at any specific project since the pricing of individual projects will vary depending on factors such as their scope, complexity, location, timescale and end-user requirements as well as the receiving tendering pool of Contractors and their appetite for work and associated risk, etc. at that point in time.
Received tender returns have been noted as irregular between parties, with increases being considerably higher than expected as Contractors extrapolate high inflation across multi-year contracts and price in excessive risk.
Source : AECOM
AECOM’s TPI evaluation for the United Arab Emirates (UAE) in 2024 is posted at circa 5 percent. This has been predominately driven by a busy tendering period during 2024, as Developers continued to race to get to market with their product while tendering to a somewhat shrinking pool of suitably pre- qualified Main Contractors who are capable of completing the works from a technical, quality and safety perspective and also meeting the required expectations from a financial stability viewpoint.
Taking a closer look at the economic forecasts for 2025, the construction industry in the UAE is poised again for more growth this coming year, with projections indicating an expansion of between 4 percent and 5 percent approximately in real terms. This growth is underpinned by substantial investments in predominately infrastructure, renewable energy, housing, and tourism projects. However, this upward trajectory is accompanied by anticipated increases in construction costs, with AECOM forecasts suggesting annual rises between 4 percent and 6 percent during 2025.
Factors influencing Tender Price Inflation (TPI):
Several key factors are contributing to the anticipated construction sector for 2025:
Increased demand for infrastructure and development projects: The UAE’s commitment to expanding its infrastructure - particularly for transportation connection upgrades (i.e., rail, metro and road), preparation for global events and to bolster tourism, is driving demand. This surge necessitates a corresponding increase in construction activities, thereby exerting upward pressure on tender prices.
Material costs and supply chain dynamics: While some material prices have shown signs of stabilization, the global construction industry generally continues to face challenges related to supply chain disruptions and material shortages. These issues contribute to cost escalations, which are reflected in tender prices.
Labor market constraints: The construction sector is experiencing labor shortages, with neighboring countries like KSA now offering higher labor wages etc. - this, coupled with increased demand for skilled workers, leads to higher labor costs. These increased costs are subsequently factored into tender prices.
Sustainability and Green Building Initiatives: The UAE’s focus on sustainable development and green building practices necessitates the use of specialized materials and construction methods. While beneficial in the long term, these requirements can lead to higher initial construction costs, impacting tender prices.
Technological advancements and integration: The adoption of advanced construction technologies, such as artificial intelligence, 3D printing and robotics is slowly transforming the industry. While these technologies enhance efficiency and sustainability, their integration requires significant investment, which can in some cases influence overall project costs and tender prices.
Suitable contracting and sub- contracting pools: Over the last 18 to 24 months, there has been a noticeable shrinkage of suitably pre-qualified main contractors and sub-contractors available to tender, win and deliver projects in the UAE. Certain Contractors have unfortunately felt the financial strain over the last 3 to 5 years and this is limiting them to be suitably pre-qualified for current projects, with some contractors having exited the UAE market already. The main contractors and sub-contractors that have managed to stay and operate in the UAE can now of pick and choose what projects to go after, resulting in higher-than-normal tender returns.
Sector-specific projections:
The impact of TPI is expected to vary across different sectors within the construction industry (MEED 2024):
Residential Construction: Projected to have grown by 5.5 percent in real terms in 2024, with an annual average growth rate of 2.7 percent between 2025 and 2028. Private investments and government initiatives aimed at meeting rising housing demand are key drivers.
Commercial Construction: Anticipated to have expanded by 6.6 percent in real terms in 2024, followed by an annual average growth rate of 5.6 percent between 2025 and 2028. The recovery in tourism and investments in the hospitality sector are significant contributors.
Infrastructure Construction: Expected to have grown by 5.9 percent in real terms in 2024, with an annual average growth rate of 4.6 percent during 2025-2028. Investments in road and rail infrastructure projects are primary factors driving this growth.
Energy and Utilities Construction: Projected to have expanded by 5.3 percent in real terms in 2024, with an annual average growth rate of 3.7 percent from 2025 to 2028. Investments in renewable energy, oil and gas and water infrastructure projects are key drivers.
Strategic considerations for stakeholders:
Given the anticipated TPI, stakeholders in the UAE construction industry should consider the following strategies:
Early procurement and contracting: Engaging in early procurement and securing contracts can help mitigate the risks associated with price escalations. Early engagement with suppliers and contractors may lead to more favorable pricing and terms.
Adoption of innovative construction methods: Embracing modular construction and other innovative building techniques can enhance efficiency, reduce waste and potentially, over time lower costs, thereby offsetting some of the impacts of TPI.
Investment in workforce development: Addressing labor shortages through investment in training and development can help ensure a skilled workforce is available to meet project demands, potentially stabilising labor costs.
Sustainable Building practices: Incorporating sustainable design and construction practices not only aligns with the UAE’s environmental goals but can also lead to long-term cost savings through energy efficiency and reduced operational costs.
The UAE’s construction industry is on a path of significant growth, with 2025 poised to be another year of substantial development across various sectors. This growth is however, accompanied by anticipated TPI, influenced by factors such as increased demand, material costs, labor shortages, technological integration and sustainability initiatives. Stakeholders must adopt strategic measures to navigate these challenges effectively, ensuring that projects are delivered efficiently and cost-effectively in a dynamic and evolving market landscape.
Source : AECOM
As we entered 2024, the construction industry faced significant pricing pressures due to the large number of ongoing projects; moreover, the country was awarded the 2029 Asian Winter Games, World Expo 2030 and the 2034 FIFA World Cup. Due to this and other factors, government project budgets have been reprioritized, affecting many of the giga projects. While Q1 and Q2 2024 prospered, the market slowed during Q3 and Q4 2024.
While Consumer Price Inflation indirectly impacts TPI, it is worth mentioning that the Saudi Central Bank reports a 1.5 percent Year on Year (YoY) and a 0.5 percent Quarter on Quarter (QoQ) increase in Q2 2024. The Saudi Central Bank noted that inflation rates were highest in housing, water, electricity, gas, and fuels, followed by the catering and hospitality sectors. In 2024, material prices have risen by 8 percent for concrete, 3 percent for formwork and 6 percent for reinforcement. Moreover, diesel prices have increased by a staggering 50 percent. According to the analysis of tender returns, commodity prices, and market testing, AECOM’s TPI growth for 2024 is at an estimated 6.0 percent.
Looking to 2025, the effect of budget cuts and project reprioritization will likely have an ongoing impact. Furthermore, the growing demand for mega projects coupled with Vision 2030 aspirations will likely result in higher input prices, including labor, plant, materials, energy, shipping and transportation costs, prelims/subcontractor rates, imported goods prices and higher project finance interest rates. Considering this, the TPI for KSA in 2025 is forecasted to be 4.0 to 7.0 percent.
As a cautionary note and a lesson learned from 2008, our businesses must be prepared and more responsive to the risks connected with market conditions. As KSA awards numerous new projects to meet the country’s objectives, through fast-track delivery routes, the resultant rubber band effect has the potential to strain the region’s supply and demand stability, resulting in hyperinflation, peak demands and undersupply. In a worst-case scenario, this could result in project costs escalating beyond economically viable levels.
Bahrain market overview
The Bahrain Economic Development Board reports that Bahrain’s economy is mainly driven by the non-oil sector, which has consistently outperformed the oil sector in recent years. There have been increased investments in construction projects, particularly housing, transportation and utilities, in line with Bahrain’s economic diversification strategy (Vision 2030) to reduce reliance on oil revenue. Furthermore, the OECD’s September 2024 Economic Outlook Interim Report projects stable economic growth of 3.2 percent in 2024 and 2025. This can be attributed to rising real incomes and progressively looser monetary policies supporting demand.
It’s important to note that Bahrain’s primary trading partners for non-oil exports and imports are Saudi Arabia and the UAE. Changes in demand, trade policies or economic conditions in these countries can significantly affect Bahrain’s economy. For example, Saudi Arabia’s booming construction industry has increased demand for expertise, materials, and services from neighboring GCC countries, creating competition for labor and materials across the region and impacting Bahrain’s industry.
Additionally, the demand for specialized professionals has led to wage inflation, affecting Bahrain’s ability to retain talent. Consequently, contractors in Bahrain have had to adjust their strategies to attract and retain skilled talent and cover higher insurance costs, leading to higher preliminary costs on projects across the region.
Considering this, AECOM forecasts that the Bahrain Tender Price Index (TPI) for 2025 has the potential to increase between 4 and 6.5 percent, given the sustained global market volatility.
Qatar market overview
Following the success of the Qatar World Cup in 2022 and the intensive construction activity in the lead-up to the event, the country witnessed a drop in construction over the last number of years. Notwithstanding, there has been a consistent number of ongoing high-profile projects supported by investments in renewable energy, industrial, and oil and gas sectors, most notably the following:
North Field East LNG Expansion Project: The USD 30bn expansion project is currently in the planning stage, with an estimated 2026 completion.
Qatar Long Distance Railway Project: The project aims to provide freight and passenger services within Qatar, as well as provide links to Saudi Arabia and Bahrain.
Sharq Crossing Project: The USD 12bn project is set to provide a 12km road connection via both bridge and subsea tunnel between North and South Doha. Initially developed in 2013, the project was relaunched in Qatar’s 2020 budget.
Hamad International Airport Terminal Expansion: The second phase of the expansion of the Hamad International Airport in Doha started in January 2023.
Simaisma luxury destination including theme park and golf course phase 1.
In terms of market trends, sustainability has become a key driver for many commercial developers to support attracting international companies to Qatar; this includes LEED accreditation, which is driving higher occupancy rates, resulting in landlords enhancing their portfolios to ensure long-term commercial viability.
While global material costs have increased over the last number of years, the cooler construction market has helped mitigate tender price escalation in a highly competitive market. Contractors are also capitalising on the increased local manufacturing capabilities in country which were developed leading up to the 2022 World Cup.
The market has also seen some international and regional property developers entering the market over the last few years, offering higher quality residential products than was previously available as Qatar looks to target the lucrative international sales market. This has resulted in an increase in premium residential construction costs, specifically for waterfront villas, apartments and branded residences in this sector.