For years, construction news in the Kingdom revolved around announcements of ever bigger and more ambitious projects. Today, the question has changed: it is no longer “What will we build?” but “What will we complete first, and at what cost?” The sector is still expanding, but it is entering a new phase defined by delivery and discipline.


What’s happening in the construction sector?
The latest data show that the sector remains in growth territory. Al Rajhi Capital’s Saudi Construction Sector Index came in at 54.4 points in September, slightly down from 55.4 in August, but remained above the 50-point mark for the fifth consecutive month. This was the slowest growth in four months. Residential projects led the readings at 56.6 points, followed by infrastructure at 55.8 points (up from 53.9 in August), while non-residential projects registered 50.9 points.


As for contracts, Saudi Arabia remained the Gulf’s largest projects market in the third quarter of 2026, with contracts worth $24.4 billion, according to Kamco Invest, citing MEED Projects data. However, contract values for the first nine months totaled $73.4 billion, down around 7.7% from $79.5 billion in the same period last year.


Meanwhile, costs rose at their fastest pace since the survey began in January, with around 45% of companies reporting higher input prices in September, compared with fewer than 1% reporting a decrease. Even so, 34% of companies expect their activity to grow over the next three months, while only 8% expect it to decline.


First: How should the construction index be read?
This type of index is based on a survey of companies about their activity compared with the previous month, including work volumes, new orders, and costs. A reading above 50 points means that more companies are seeing improvement than decline—in other words, the sector is expanding. A reading below 50 points indicates contraction.
It is important to distinguish between “contract awards” and “execution”: a decline in the value of new contracts does not mean construction has stopped, since many projects awarded in previous years are still underway.
What does the “discipline phase” mean?


According to a report by Gulf Construction magazine on Riyadh, the capital’s construction sector today brings together two parallel realities:
Projects tied to fixed deadlines: These include Expo 2030, the 2034 World Cup stadiums, King Salman International Airport, and the Riyadh Metro expansion. They are seeing clear momentum, record contracts, and a growing workforce.


Projects with less fixed timelines: Some have been temporarily paused, redesigned, or given extended schedules as the Kingdom balances its ambitions with financial constraints.


One prominent example of the first type is Expo 2030 Riyadh, which spans 6 million square meters. The main utilities and civil works contract was awarded to Nesma & Partners in January, followed by a second major infrastructure contract awarded to Al Yamama. Construction has also begun on the third runway at King Salman International Airport, which will be 4,200 meters long, as part of a plan to increase aircraft movements per hour from 65 to 85.


On the other hand, Reuters reported in January that construction work on The Mukaab project in New Murabba had been suspended after excavation and foundation work were completed. It became the first major Riyadh project to be officially paused for review, with a contractor for the next phases expected to be selected in 2027.
Why are costs rising?


There are several reasons for rising costs, including:
Construction costs themselves: The average construction cost in Riyadh reached $2,874 per square meter, compared with $2,593 a year earlier—an increase of around 11%, according to Turner & Townsend.


A shortage of skilled labor: Particularly in electromechanical work, which is among the sector’s most pressing constraints.


Longer lead times: Equipment delivery times have stretched to 25 weeks.
Supply-chain disruption: Material supplies have been affected by regional conflict. Reports indicate that Expo 2030 is moving toward using locally manufactured pipes, cables, and concrete to limit these disruptions.


Competition for contractors and materials is also intensifying as major deadlines such as Expo 2030 and the 2034 World Cup draw closer.


Where are the contracts going?
Third-quarter data reveal a shift in how contracts are distributed across the Kingdom:


Construction contracts: The largest sector, rising 7.6% year on year to $9.2 billion.
Gas contracts: Surged 80.1% to $6.9 billion.
Oil contracts: Fell to $460 million, compared with $3.8 billion a year earlier. The report attributed the decline to disruptions in the straits that affected energy exports.
Electricity contracts: Declined 83.4% to $1.6 billion.


The value of planned but unawarded projects across the Gulf remains around $2.05 trillion, of which Saudi Arabia accounts for 49.7%, or approximately $1.02 trillion.


In project management, there is a principle known as the “iron triangle,” whose sides are scope, time, and cost. Changing one side affects the other two. When deadlines cannot be postponed—such as the opening of Expo 2030 and the kickoff of the 2034 World Cup—time is the side that cannot move, leaving scope and cost to absorb the pressure of balancing the project. Perhaps that is exactly what Riyadh is seeing today: not a retreat from ambition, but a reprioritization of it, with what cannot wait completed first and everything else given more time.


Disclaimer: This article is for informational purposes and aims to explain the news in a simple, reader-friendly way. The information is drawn from published news sources and has been adapted and simplified; it does not represent an official position or statement by any organization. Information may be updated after publication, so readers are advised to consult official sources for full details.