JLL raises Saudi construction cost forecast as copper and aluminum prices surge

Saudi construction cost inflation has more than doubled in a year and is set to stay elevated through 2027. JLL has raised its tender price inflation forecast for 2026 to 5%, up from an earlier forecast of 4%, compared to 2% recorded in 2025, and projects 4-5% next year as material costs and supply chain disruption keep pressure on the market, according to its Saudi Arabia construction market review for 1H (pdf).

Materials and fuel costs are doing most of the work. Copper prices rose 44.5% y-o-y through August, aluminum 23.9%, and diesel 7.9%, JLL said. Rerouting around regional shipping disruption has added to delivery times and landed costs, and contractors are absorbing part of the increase in thinner margins rather than passing all of it through to clients.

The benchmarks: JLL puts Grade A office fit-outs at SAR 4.5k-6k per sqm, mid-range residential at SAR 3.2k-4.1k per sqm, hospitality at SAR 7k-11k per key-equivalent sqm, and industrial and logistics at SAR 1.9k-2.6k per sqm — with ins., bonding, and preliminaries accounting for a widening share of tender totals.

JLL’s figure runs ahead of the official series: Gastat’s construction cost index rose 2.3% y-o-y in August, a gap that reflects tender pricing picking up forward risk — longer lead times, currency and freight exposure, and contingency — that a cost index measuring inputs doesn’t capture.

Supply isn’t the constraint — pricing is. The amended White Land Tax, which moved to progressive rates of up to 10% of land value from a flat 2.5% and added an annual levy on vacant properties, is pushing undeveloped plots toward development, while the PPP pipeline continues to add schemes. More work tendered into a market where costs are still climbing means more projects priced at the top of the range.