Business & FinanCe Jeddah’s building boom
Jon gorvett reports from Saudi Arabia
When it comes to the Middle East’s recent real estate and construction boom, most international attention has been on the lower Gulf states. Yet these days, the other side of the Arabian Peninsula is catching investors’ eyes. Saudi Arabia is currently undergoing a massive, kingdom-wide economic expansion, with the Red Sea port city of Jeddah and its surrounding region a focus for much of this activity. Whole new cities are being constructed, while Jeddah itself will get a complete facelift. Projects vary from the colossal, such as the King Abdullah Economic City (KAEC) and the Knowledge Economic City (KEC) at Medina, to the merely humongous, such as the new International City Centre for Jeddah and the expansion of the King Abdulaziz University (KAU).
Meanwhile, there are also more modestly giant projects such as the Jeddah Islamic Port expansion and the King Abdulaziz International Airport (KAIA) expansion and revamp. All of this is getting an entirely new land transport infrastructure too, with railways and roads planned that will link the west and east coasts of the peninsula and radically alter the whole way the region does business. As a region containing the two Holy Cities of Mecca and Medina, a major new boost in the infrastructure for coping with the millions of pilgrims that arrive on hajj every year is also underway. The city has expanded at breakneck speed, shooting out from its 1946 territory of 1.5 sq km, all within a walled city, to its current sprawl up and down the Red Sea coast, home to 3.5m people. The infrastruc
saudi women enjoy the shopping experience at one of the many new shopping malls opening in the country
ture has in many respects failed to keep up with that expansion. This is particularly the case with canalisation and sewerage, both major challenges for the current city. Any underinvestment in the past, however, is now changing rapidly into massive investment in the present. Almost everywhere you look nowadays, Jeddah is growing new towers, malls and roads. The most astonishing project though is 100km up the coast at Rabigh. That is where the KAEC is being built, one of six economic cities unveiled by King Abdullah as part of a massive programme of building work that will change the entire face of the country.
40 The Middle easT June 2008 The KAEC is set to cover an area of some 168 sq km. When complete, it will have a population of some 2m people, having created for them around 1m new jobs. The idea is being facilitated by the Saudi Arabia General Investment Authority (SAGIA) and developers Emaar Properties PJSC from Dubai, which has the largest block of shares in the KAEC, with the rest taken by Saudi investors. The city is to have a seaport, a light industrial district, a central business district, an educational zone, a sea resort and a residential area, with a total investment of around $27bn expected to pay for it all. The economic cities are to be entirely private sector developed too, making the KAEC the largest private sector project in the region. Up the road, outside Medina, another of the economic cities is also being built. The KEC will cover some 4.8m sq metres – creating 9m sq metres of built up land – with an investment of $7-8bn. The city is to be home to 150,000 people, with 30,000 more accommodated in its hotel and other visitor spaces. The KEC is expected to create 20,000 jobs, with around 1,200 new retail outlets providing some of these. Meanwhile, back in Jeddah, the new International City Centre project is also underway, taking the site of the city’s old airport, just north of its old centre, Al Balad. This is to see another Emaar project, Jeddah Gate, along with blocks developed by contractors MMLC and the KAU, which aims to have a Knowledge Park on the site. Other major construction projects currently at the planning stage include the King Abdullah Tourist City, up on the Northern Corniche, the main seafront road of the city. This will cover a 1m sq metre area and target 10m visitors annually, with a park featuring a sound and light show illustrating the Prophet’s stories. Most spectacular of all the current plans though is a scheme to outdo Dubai and build the world’s tallest skyscraper in Jeddah. The idea is for the world’s first milehigh tower, which will have an estimated $10bn cost. The tower would likely be part of the massive Jeddah Project, a Kingdom Holding Company (KHC) scheme, which will also have surrounding residential and commercial areas, including hotels. The whole site covers some 5.3m sq metres. Linking all these giants up will be a suitably giant new transport grid. The grand central train and bus station planned for the new International City Centre will have plenty of destinations on its departure boards. The idea is for a highspeed rail link between Mecca and Medina,
FUELLING the boom is, of course, the high price of oil. With a
high point, reaching over $122 a barrel in May 2008, after a sustained and
lengthy period of price rises, saudi arabia has a colossal budget surplus
these days. The country produces around 8.5m barrels of oil a day, with
the cost of production around $2 a barrel. The profits are colossal.
Traditionally, much of the country’s oil revenues tended to be invested
in projects outside the country. europe, the us and other Middle eastern
states tended to be the destination. yet that trend has begun to change in
recent years, particularly since 9/11, when the investment atmosphere in
the West became more hostile to arab money.
at the same time, locals will often say Jeddah has been somewhat
investment starved in recent years.
via Jeddah. This will also link into the Landbridge, a project to build a high-speed link across the peninsula to Riyadh and then Dammam and Jubail on the Gulf coast. The Landbridge will also have a road component, with the main target for both being cargo. The idea is that ships currently coming from the Mediterranean via the Suez Canal and meandering around the peninsula before heading into the Gulf will instead be able to unload at the KAEC’s new seaport, or at Jeddah Islamic Port. From there, the cargo is shipped across country at far faster speeds. Insiders reckon the current threeweek journey from Port Said to Dammam could be cut to three days. Jeddah Islamic Port is also of course getting a huge expansion in order to cope with already surging trade and carry it through to this next level. A new terminal is being added, while the existing two get an expansion. The port is also deepening too, with berths under construction that can take the largest vessels afloat, such as the Panamax class. Naturally, as part of this, the port is also getting its own major residential and commercial real estate project, a planned waterfront complex that will give some of the best views in the city. Yet not only are the maritime and land transport links being improved. Up at the KAIA, the existing terminals – including the hajj terminal, the world’s fourth largest in terms of area – are getting a revamp, while the plan is for a whole new airport development, involving three runways and a line of new terminals, expanding from the existing space. Meanwhile, the road infrastructure in Jeddah itself is getting some big investments,
any underinvestment in the past is now changing rapidly into massive investment in the present. almost everywhere you look nowadays, Jeddah is growing new towers, malls and roads
with 15 new road projects budgeted by the municipality. At the same time there is clearly enormous investment potential in environmental waste management projects, with the city facing severe problems in its lack of a sewage system in many areas. Sorting out this and the general problem of environmental damage from inef ficient waste disposal – along with water table management – will also be exercising minds in the years ahead. Of course, these projects are likely to come up against some of the current challenges faced elsewhere in the construction sector – such as rocketing equipment and materials costs and labour shortages – yet project managers seem willing to bite the bullet and pay the extra. As a result, the region from Medina to Mecca is set to be transformed, with many in Jeddah hoping that their unique maritime city will as a result once more be capturing the world’s imagination. n
The Middle easT June 2008 41