The Middle East construction sector faces a notable slowdown in 2025, with contract awards dropping 39 percent in the Gulf Cooperation Council during the first five months compared to last year. This dip, driven by Saudi Arabia’s gigaprojects scaling back amid tighter spending, still leaves room for large-scale opportunities in places like the UAE, where project investments continue to thrive.
Saudi Gigaprojects Face Major Cuts
Saudi Arabia’s ambitious gigaprojects, key to its Vision 2030 plan for economic diversification beyond oil, have hit rough patches. Reports show an $8 billion impairment loss by the end of 2024, linked to cost overruns and delays in flagship developments like NEOM and The Line.
This year, the kingdom has slowed contract awards as global market pressures and budget constraints force a rethink. For instance, The Line, once planned as a 106-mile linear city, now scales back to just 1.5 miles, with layoffs at construction sites signaling execution challenges.
Despite these setbacks, not all progress halts. Projects like Qiddiya and Diriyah keep moving forward in phases, focusing on high-priority elements such as entertainment districts and cultural hubs.
Officials point to uncertain oil prices and rising material costs as main culprits, pushing a more cautious approach to spending.
GCC Market Sees Sharp Decline Overall
Across the Gulf Cooperation Council, which includes Saudi Arabia, UAE, Qatar, Kuwait, Bahrain, and Oman, the projects market has collapsed by about 40 percent year-on-year in early 2025. Total contract values fell from $110 billion in 2024 to $67 billion this year.
This decline stems from regional efforts to control spending amid economic headwinds. Yet, experts note that this is not a full stop but a recalibration, with governments prioritizing sustainable growth.
In comparison, previous years saw booms fueled by high oil revenues, but 2025 brings a shift toward efficiency. For example, public-private partnerships gain traction to share risks and costs.
Analysts predict a rebound later in the year, as infrastructure needs in transport and energy remain strong.
Key factors contributing to the decline include:
- Tighter fiscal policies in response to fluctuating global energy prices.
- Delays in megaprojects due to supply chain issues and labor shortages.
- A focus on completing existing works before launching new ones.
UAE Leads with Steady Project Spending
While Saudi Arabia pulls back, the UAE emerges as a bright spot in the Middle East construction landscape. The country has nearly matched its 2024 contract awards, leading the GCC in total project spending this year.
Dubai and Abu Dhabi drive this momentum with investments in aviation, real estate, and tourism. Projects like airport expansions and luxury developments continue at a brisk pace, attracting international contractors.
This resilience comes from diversified funding sources and a strong emphasis on public infrastructure. For instance, the UAE’s focus on Expo legacy projects and sustainable builds keeps the sector active.
Compared to neighbors, the UAE benefits from stable policies and investor confidence, making it a go-to hub for construction firms seeking opportunities.
Opportunities Persist in Key Sectors
Even with the slowdown, the Middle East offers plenty of large-scale construction chances across multiple areas. Sectors like aviation, sports facilities, and real estate show promise, with ongoing works and new tenders.
In Saudi Arabia, clients such as Roshn Group award contracts selectively, emphasizing phased delivery. The region also sees growth in prefabricated construction, driven by needs for rapid builds in gigaprojects.
Hotel construction hits an all-time high, with 650 projects in the pipeline, led by Saudi Arabia, Egypt, and the UAE. This boom targets luxury and upper-upscale segments, reflecting tourism ambitions.
A quick look at emerging trends:
| Sector | Key Opportunities | Estimated Value (2025) |
|---|---|---|
| Aviation | Airport expansions in UAE and Qatar | $20 billion |
| Real Estate | Mixed-use developments in Saudi and UAE | $15 billion |
| Sports and Entertainment | Stadiums and venues for events | $10 billion |
| Infrastructure | Roads, rails, and PPPs across GCC | $12 billion |
These figures highlight where contractors can find work, despite broader cuts.
Experts forecast that by 2028, Saudi Arabia alone could spend over $175 billion annually on industrial and mega projects, based on long-term plans.
The push for non-oil growth keeps the door open for innovative solutions, such as off-site prefabrication to speed up timelines and cut costs.
Broader Impacts on Regional Economy
The construction slowdown affects jobs and supply chains, with some workers facing layoffs in Saudi sites. However, this prompts a shift toward skilled labor and technology, like AI in project management, to boost efficiency.
Regionally, countries adapt by seeking foreign investment and bonds. Saudi Arabia remains the GCC’s top borrower, raising $47.93 billion in the first half of 2025 through debt issuance, down 20 percent from last year but still substantial.
This financial strategy supports ongoing projects while managing deficits. In the UAE, real estate markets show robust growth, with upward momentum expected through the year’s end.
Overall, the sector’s challenges highlight the need for realistic timelines and diversified funding, ensuring long-term stability.
Future Outlook for Middle East Construction
Looking ahead, the Middle East construction market could stabilize as governments refine their strategies. With oil prices stabilizing and global interest in the region, a gradual uptick in awards seems likely by late 2025.
Initiatives like Saudi’s Vision 2030 and UAE’s economic plans will continue driving demand, even if at a moderated pace. Contractors should watch for tenders in sustainable and tech-integrated projects.
In summary, while 2025 brings hurdles, the region’s commitment to growth ensures ongoing opportunities for those ready to adapt.
What do you think about the slowdown’s impact on global construction trends? Share your thoughts in the comments and pass this article along to others interested in Middle East developments.
