Saudi reforms to boost construction in entertainment sector

Construction activity is expected to pick up in Saudi Arabia’s entertainment segment this year, driven by the recent leisure-related initiatives announced by the government, analysts told Argaam.

“We believe there is a real potential to see contracts rising in the entertainment segment,” said Raya Majdalani, research manager at Knight Frank.

The Kingdom last year said the ban on cinemas will be lifted, likely from next month. It also announced the launch of a sports and entertainment city in Riyadh, in which the sovereign wealth fund, Public Investment Fund (PIF), will be the largest investor.

Also in 2017, PIF said it was planning a new company, with an initial capital of $2.67 billion, which will invest in the country’s entertainment sector and will also seek to establish strategic partnerships. Such developments provide the context for growth in the segment, Majdalani said.

The progress in the entertainment sector would also have an impact on the parallel segments as demand for convention facilities and movie theaters rises, allowing hotels and shopping malls to respond.

“A number of musical and cultural events were held across the Kingdom in 2017, the high attendance at those events is expected to lead to more (events) in 2018,” said Ahmed Almihdar, senior analyst (research) at JLL.

“Facilities to host such events are expectedly limited in Saudi,” he added.

On the other hand, the country’s plans to boost its tourism sector will likely lead to a growth in hospitality projects as an increase in the number of travelers will lead to higher demand for hotels and hotel-apartments, mainly in major cities such as Riyadh and Jeddah.

According to a recent report from BNC Project Intelligence, the hospitality segment currently makes up approximately 14 percent of all project values in Saudi Arabia.

Further, as a trickle-down effect, the retail sector could also see an impact leading to a heightened construction activity.

“Although limited in number, the scale of the projects are vast (for example: Mall of Saudi, The Avenues, etc),” said Imad Damrah, managing director at Colliers International (KSA).

According to Damrah, Saudi Arabia is also poised to witness fresh construction trends in 2018 that will include use of new construction technology as real estate firms focus on smart development to cut costs and delays.

“New construction technology is becoming a focus, especially within the affordable housing/residential market,” Damrah said.

“Ministry of Housing is currently testing technologies that would both reduce the cost of construction and reduce the construction period. Some interesting announcements this year, in this regard, are expected,” he added.

Write to Nadeshda Zareen at nadeshda.zareen@argaamplus.com