The Gulf states have over $2.9tn in the construction pipeline. Ambitious giga-projects, such as Neom and The Line, along with plans to construct 500,000 affordable homes, are transforming Saudi Arabia. After years of planning, these initiatives are now entering the construction phase.
In the UAE, construction output has bolstered growth despite declining oil activity. The construction sector in the Abu Dhabi emirate experienced remarkable growth of 13.1% last year. The UAE is heavily investing in its industry and logistics. Aldar is set to begin construction on a logistics park in Dubai in Q4 2024 as part of a $272m investment.
Egypt is experiencing a slowdown in inflation, supported by IMF-backed reforms. The country is developing its New Administrative Capital, alongside numerous foreign investment projects. Notably, UAE's KSH is investing $500mn in a mixed-use project in Cairo. Production will soon start at Egypt's first MDF factory, Nile Wood, on a 200,000 m³ Dieffenbacher line.
Morocco's construction sector shows signs of recovery, aided by financial support for low-income families and a $34bn investment plan for 2024 focused on infrastructure, agriculture, and industry.
The region's construction boom requires significant amounts of formwork and scaffolding, attracting global producers. Chinese companies have been active at recent fairs in Dubai and Riyadh, as the Gulf remains a crucial market for Chinese plywood. The sluggish real estate in China has also prompted developers to seek opportunities overseas. Saudi Arabia has recently signed agreements with Chinese corporations CSCEC and CMEC to build 20,000 new homes with each.
The rising demand extends to other sectors. European and Vietnamese furniture makers are seeing strong growth in the Gulf, albeit from a low base. South Korean KD Wood Tech is collaborating with Theeb to sell advanced wood products in Saudi Arabia.
Challenges and green opportunities
On the downside, Saudi Arabia's GDP contracted by 0.4% in Q2 2024 due to reduced oil activities, leading to extended giga-project deadlines and downsizing. Neom has introduced stabilization guarantees to attract private investment, while the Saudi government offers a 30-year income tax exemption for global companies' regional headquarters.
Ongoing Red Sea attacks are disrupting logistics, with the IMF estimating a potential 1% GDP loss for countries with Red Sea ports if disruptions continue through 2024. Egypt is particularly affected, as the Suez Canal is a major source of foreign currency.
Currie & Brown forecasts a 2-3% rise in construction costs in the UAE and 5-7% in Saudi Arabia in 2024. To address these challenges, developers are encouraged to adopt modular construction and embrace sustainability.
This environment presents opportunities for wood products like glulam and CLT. There are notable wooden projects in the region: Hasslacher glulam roofing for the D1 Tower entrance in Dubai, NZ TimberLab's glulam for Fujairah City Centre, and the UAE's first CLT villa developed by Al Masaood Bergum in 2022. Recently, Australia's Weathertex hardwoods have been used to house engineers at Saudi giga-project sites.
Combined with emerging voices in Saudi academia advocating for wood adoption in construction, this could yield results over time. But still, the industry remains cautious, relying on innovations like green concrete with natural binders and wider use of desert sand.
