Markets are preparing construction markets in the Gulf Cooperation Council (GCC) are preparing to face a new wave of rising costs this year, driven by growing challenges in supply and skilled labor. According to a recent report by the consulting firm «Corey & Brown,» the increase in construction costs is expected to range between 2% and 5% in the UAE, while it could reach 7% in Saudi Arabia.
Reasons for the Rise: Strong Demand and Supply Challenges
The report noted that strong demand for construction projects is the main reason behind this increase, putting pressure on the availability of skilled labor and limited supplies of essential materials. The report, titled «Building a Resilient Future: Adapting to Uncertainty in 2025,» emphasized the importance of developing proactive strategies to ensure project continuity in the face of these challenges.
Saudi Arabia: A Construction Boom and Ambitious Projects
Saudi Arabia is experiencing a boom in the construction sector, driven by economic growth projections of 4.4% in 2025, compared to 1.4% last year. Investments are concentrated in infrastructure, the residential sector, and hospitality, as the Kingdom prepares to host the 2034 World Cup and Expo 2030.
Mega-projects such as «Neom» and «The Line» form the cornerstone of this boom, with implementation accelerating to meet the ambitious timeline of Vision 2030. The construction of stadiums and hotels, as well as the development of transportation networks and infrastructure, will be among the most prominent projects supporting growth in the sector.
UAE: Economic Momentum Boosts the Construction Sector
In the UAE, forecasts point to strong economic growth of up to 6.2% by 2025, supported by major government initiatives such as the «Sheikh Zayed Housing Program» and **«Energy Strategy 2050»**. These large-scale projects will drive demand for specialized materials and skilled labor, which may lead to a further increase in costs.
Amid global geopolitical tensions, companies face challenges related to potential supply chain disruptions, necessitating the development of contingency plans to diversify material sources and mitigate the risk of project delays.
Global Factors Behind Rising Costs
The «Corey & Brown» report highlighted a range of global factors contributing to rising construction costs, most notably:
Economic uncertainty: Although inflation rates and interest rates have stabilized, geopolitical conflicts and political instability are placing additional pressure on labor costs and supply chains.
The digital revolution: The growing reliance on technology and artificial intelligence has driven up demand for rare and specialized materials, thereby increasing costs.
Skilled Labor Shortage: This challenge is one of the most significant obstacles facing construction projects worldwide, particularly in high-growth sectors such as renewable energy and digital infrastructure.
How Are Companies Addressing These Challenges?
To address these challenges, the report recommended that companies in the construction sector adopt flexible and proactive strategies to ensure projects continue without disruption. Among the most notable of these strategies are:
Diversifying supply chains: Relying on multi-source networks reduces the risk of supply disruptions.
Addressing the skills shortage: Investing in workforce development and ongoing training helps bridge the growing gap in skilled labor.
Digital transformation: The use of smart data and advanced analytics helps companies make more accurate cost estimates and make quick and effective decisions.
In this context, Alan Manuel, CEO of the Cori & Brown Group, explained: «Inflation in construction costs has become an inescapable reality. The biggest challenge lies in flexibility and careful planning to ensure success in 2025 and beyond.»
Looking Ahead: Innovation and Strategic Planning Are the Answer
As the construction sector in the Gulf states prepares for a new phase of development, innovation, rapid adaptation, and strategic planning will be the decisive factors in overcoming current challenges and seizing future opportunities.
Amid these transformations, flexibility and the ability to restructure business strategies remain among the most important tools for ensuring the sector’s growth and stability in the coming years.
