Saudi tender price inflation rises 5% in 2022 on higher contractor, commodity demand – JLL

Saudi tender price inflation rises 5% in 2022 on higher contractor, commodity demand – JLL

The annual tender price inflation (TPI) in Saudi Arabia has risen by 5 percent in 2022, driven by growing contractor and labour demand, commodity, and construction material price fluctuations, JLL said in its fourth quarter 2022 KSA construction market intelligence report.

The midpoint TPI forecast shows a potential year-on-year growth of 6 percent in 2023 associated with the estimated project pipeline value correlated to future demand, the consultancy said, citing information gathered from market sources.

Global economic volatility in the first two-quarters of 2022 created challenges in the Saudi construction market with regard to delivery lead times and rapid price hikes with suppliers reluctant to guarantee prices for extended periods

However, the sector saw improvements in the third quarter, implying that price peaks have passed. Nevertheless, price increases remain a significant risk due to the correlation between economic factors and observed trends since 2020.

JLL emphasised that future construction costs must be balanced against the local market and global economic factors.

Though commodity prices are softening or have already flatlined, the Saudi construction sector is heating up, putting pressure on the existing supply chain, and highlighting the need for greater competition to complete the pipeline of projects.

Need for mitigation strategies

While inflation projections for the Kingdom