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Data centre and hotel construction costs in the UAE and Saudi Arabia are expected to rise, driven by the high concentration of energy-intensive materials in mechanical, electrical and plumbing (MEP) systems, UK-based construction and cost management consultants Currie & Brown said in a new report.
Data center project costs could rise by up to 9.9 percent in the UAE and Saudi Arabia, while hotel project costs could rise by around 9.5 percent.
The cost increase will be driven by steel and aluminium prices, which are likely to rise in the UAE and Saudi Arabia by up to 15.9 percent and 10.5 percent, respectively, by September under a higher oil price scenario. Copper prices are forecast to rise by 5.4 percent.
Demand for commodities remains strong, driven by giga-projects, airport expansion, hospitality developments and the rapid growth of data centre construction.
“Saudi Arabia and the UAE have two of the most ambitious construction pipelines in the world. With demand for materials already strong, rising oil prices are adding further pressure to supply chains and construction costs,” said Craig Finlayson, Regional Commercial Director, Middle East.
The agreement between the US and Iran to end the conflict has begun to ease concerns around oil supply and shipping through the Strait of Hormuz. However, a return to normal will take time, and uncertainty remains over where oil prices will settle and how markets will respond in the months ahead.
The challenge for construction leaders is not preparing for a specific event. It is creating projects, programmes and strategies with real flexibility that can respond to change without losing momentum, the report stated.
(Writing by P Deol; Editing by Anoop Menon)
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