Saudi Arabia’s construction sector is poised for a shift towards sustainable growth, as outlined in JLL’s recently released Saudi Arabia Construction Market Review for H1 2026. The report indicates that the market is transitioning from a phase of hyper-growth to a more measured pace, reflecting maturation and a focus on long-term sustainability.
According to JLL, this anticipated growth is largely driven by recent policy changes, notably Riyadh’s revised White Land Tax, which aims to stimulate construction activity by incentivizing the development of previously underutilized land. This policy is expected to inject fresh momentum into the market, facilitating a more balanced approach to development.
However, the sector faces significant challenges, including ongoing geopolitical tensions that are disrupting regional trade routes and causing upward pressure on commodity prices. These factors have led to extended delivery timelines for imported construction materials and equipment, creating scheduling risks and increasing costs for essential materials such as steel, aluminum, and cement.
Maroun Deeb, Head of Project & Development Services for the Middle East and Africa at JLL, noted, “We are seeing an evolution in Saudi Arabia’s construction sector as it transitions from hyper-growth to a mature, sustainable phase.” He emphasized that this shift represents a structural change in project delivery, where success increasingly relies on innovative procurement strategies to navigate supply chain challenges and support the Kingdom’s long-term economic growth.
In light of current market conditions, JLL has adjusted its 2026 Tender Price Inflation (TPI) forecast to approximately 5.0%, with a range between 4.0% and 6.0%. This adjustment reflects a significant increase from the previously projected 4.0%. The report highlights that cost escalations are particularly concentrated in metal-intensive, import-dependent trades, with notable price increases for key construction materials and fuels. For instance, prices for copper, aluminum, and diesel have surged by 44.5%, 23.9%, and 7.9%, respectively, over the past year.
Despite these cost pressures, the tendering environment remains competitive, with contractors absorbing some of the increased costs through compressed margins. This dynamic has helped prevent inflation from escalating further.
Looking ahead, expanding opportunities in Public-Private Partnerships (PPP) across sectors such as healthcare, education, and urban development are attracting a diverse mix of local and international players. JLL’s forecast suggests that TPI will stabilize around 5.0% in 2027, as input-cost pressures persist and competitive dynamics continue to shape the market.
As Saudi Arabia’s construction market transitions to this new phase, stakeholders will need to adapt to the evolving landscape, focusing on sustainable practices and innovative strategies to ensure long-term success.
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