The building industry in the Middle East will face fresh challenges this year, with construction costs predicted to rise by up to 7%, according to a new report.

Construction costs in the UAE are set to increase by 2-3% and in Saudi Arabia by 5-7% in 2024, following an increase of 3% and 7%, respectively, last year, consultancy firm Currie & Brown reported on Tuesday.

Businesses in the region are not alone in experiencing spiralling construction costs. Currie & Brown said cost increases will be experienced across every one of its operating regions in the year ahead.

“Inflation remains the primary challenge for the construction industry and the dominant driver of cost increases. Towards the end of 2023, inflation appeared to be easing. However, the situation remains changeable across the Gulf, with inflationary pressures persisting,” the report said.

“Unpredictable price swings continue to challenge developers in the region, although this is offset by the stability in the current oil price.”

With costs rising, construction firms would do well to develop new processes and capabilities to keep costs under control and projects on track, said the company, which provides cost management, project management and advisory services.

“2024 will bring fresh challenges for the construction industry, but these also present opportunities for firms and clients,” said Doug McGillivray, Managing Director, Southern Gulf.

One of the solutions that developers can consider is adopting new ways of working, such as modular construction. This approach will help cushion the impact of local skills and materials shortages.

Builders can also incorporate sustainability at every stage of the project and embrace digitisation.

“By considering sustainability, embracing digital technologies and developing new ways of working, both will benefit from operational efficiencies. This will help mitigate the impact of construction cost increases now and, in the future,” said McGillivray.

(Writing by Cleofe Maceda; editing by Seban Scaria)