Increased demand in hospitality and luxury property to boost demand for construction activity in the Middle East

 

The Middle East has emerged as a leading tourism destination after the pandemic-induced restrictions were lifted globally. The significant rebound in the tourism sector has resulted in the undertaking of many new hotel development projects across the Middle East in 2022. Diriyah Gate, for instance, announced 16 new hotels are slated for construction at the US$50 billion giga-project. Some of the hotel brands planning to launch the project at Diriyah Gate include Faena, Corinthia, Hyatt Palace, and Taj, among others. 

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More global hotel brands are projected to undertake new construction projects in 2023, as the rebound in tourism activities continues over the next 12 months. The spending towards these construction projects is expected to lead to the growth of the commercial construction market in the Middle East.

·         In terms of cities in the MENA region, Dubai is leading the hotel construction activities. According to the Q4 Global Construction Survey from ConsTrack360, over 128 hotel projects are expected to be initiated over the next 4 quarters in Dubai.

Across the MENA region, there are over 733 hotel projects under development. Saudi Arabia is another key growth driver in the region in terms of the number of hotel projects. In November 2022, Emirates also launched the UAE Tourism Strategy 2031. The strategy aims to further strengthen the UAE’s position as the leading destination for tourism around the world, as it plans to attract 40 million hotel guests.

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Along with new hotel construction projects, the demand for luxury residential units will also support the growth of the construction market in the Middle East. Binghatti, for instance, announced a new residential project in Dubai in November 2022.

·         In collaboration with Jacob & Co., Binghatti has announced to development of the tallest residential structure, Burj Binghatti Jacob & Co Residences, in Dubai. The residential project comprises more than 100 stories, featuring two and three-bedroom residences.

·         In December 2022, Al Habtoor Group, the UAE-based conglomerate, also announced that it will build three mega-residential projects, with an investment totaling US$2.58 billion. These projects are located at different locations in Dubai and are planned for construction in 2023.

The DARI platform, launched by the Department of Municipalities and Transport (DMT), reveals that 18 new projects have been launched in Abu Dhabi. These projects, in the United Arab Emirates, will contribute a total of 5,037 housing units across Abu Dhabi. From the short to medium-term perspective, many more residential projects, including those in the luxury segment, are expected to be announced in the Middle East.

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Driven by the influx of high-net-worth individuals, the demand for luxury residential units is expected to grow further in the region, thereby supporting the growth of the overall construction industry over the next three to four years.

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