With the influx of pilgrims to Makkah and Madinah soaring year after year, the Saudi government and property developers are racing against time to meet the demand for accommodation, transportation and a range of services, says ABDULAZIZ KHATTAK.
THE rising number of pilgrims visiting Makkah and Madinah in Saudi Arabia has fuelled an ongoing real estate and construction boom in these two holy cities, which is triggering development of world-class infrastructural networks including roads, railways, metros and airports.
Makkah recorded real estate deals worth SR59.4 billion ($16.2 billion) in 2013, disproving forecasts that deals in the sector would fall. Deals up to the end of last year witnessed a rise of 350 per cent compared with the previous year during which sales valued at SR16.1 billion ($4.3 billion) were registered, according to report by Arab News. A record 17,920 real estate deals were finalised in the city in 2013, four times the figure for 2012.
Real estate experts expect the index to rise in the holy capital this year, and the value of deals in the sector to rocket up to SR80 billion ($21.32 billion) in view of the massive developments in the real estate sector, and the generous expenditure on infrastructure for the city, mainly on public transportation, ring roads or highways, train stations and expropriation of thousands of properties.
Real estate services and investment management firm JLL’s head of hotels and hospitality in the Middle East, Chiheb Ben-Mahmoud, says the kingdom’s massive $21-billion redevelopment of the Grand Mosque – Islam’s holiest mosque – and surrounding areas has sparked a resurgence in the area’s real estate.
“The Grand Mosque is being renovated and expanded to accommodate 1.5 million pilgrims at one time in the site’s largest redevelopment in history. The government also is redeveloping the city’s slums, including expropriating thousands of properties, which involves paying more than SR100 billion ($26.65 billion) in compensation. Much of that money is being reinvested into the city’s market,” he says.
Mansour Abu Al Reesh, head of the Real Estate Committee at Makkah Chamber of Commerce and Industry, says: “Investment in infrastructure in the holy city has become attractive to more and more investors who recently moved to establish large investment portfolios in building major residential projects, such as hotels and residential towers.”
Yusuf bin Awad Al Ahmadi, a developer, says investing in Makkah’s real estate has become highly lucrative. “This has led to the revival of the real estate market, in addition to the disbursement of compensation related to the expropriated properties for the expansion of the Grand Mosque.”
Among real estate projects, the hotel sector is expected to account for a larger share of investments than ever before, as investors see Makkah as a safe bet in view of the increasing number of Hajj and Umrah pilgrims that will come once expansion and construction projects are completed.
International hoteliers also are planning huge developments in the city.
Furthermore, a consortium of Saudi and Emirati developers also are building the first integrated staff housing complex to accommodate 25,000 workers in the city’s robust hospitality sector.
Grand Mosque & adjoining areas
The Grand Mosque is the main attraction for over six million pilgrims who enter Makkah each year and is the focal point for a major transformation of one of the oldest cities in the region with skyscrapers and residential blocks. The project to expand the mosque consists of three main areas, with the first being the expansion of the main mosque itself to accommodate 1.5 million worshippers.
The second phase includes the development of exterior areas such as rest rooms, tunnels, and other services to ensure the smooth movement of worshippers throughout the site. The third involves a support services area that includes a district cooling plant, a power station, water desalination stations, and other services. Saudi Binladin Group is the main contractor executing the project at a cost of $21.3 billion, while the Saudi government has paid out $35.5 billion to the owners of properties that have been expropriated to make room for the expansion.
The ongoing expansion of the Grand Mosque toward the north-west and north-east will increase its capacity to two million people.
Among the largest developments near the Grand Mosque is Jabal Omar Development Company’s project which – now in its fourth phase – involves the construction of 37 hotel towers and serviced apartments. The project has a total built-up area of around 320,000 sq m and will be delivered over a three-year period starting in January 2017.
Meanwhile, two major developments are under way on the outskirts of Makkah. These include Wahat Makkah, a large and high-profile integrated development complex which will have a total of 2,200 apartments when complete, and the low-rise Al Muzdalifah Government Complex, which will cover a total area of two million sq m.
Other major new projects include the development of a 1.5-million-sq-m site in the Bawabat Makkah area. Saudi asset management and private equity firm Swicorp has signed an agreement with Bawabat Makkah Company to jointly establish a real estate development fund, Bawabat Makkah First Real Estate Development Fund, worth $266 million, to develop the site.
Among other developments, the Saudi government has designated a one-million-sq-m area in Makkah for a project that will focus on the Prophet and his teachings. To be located outside the Haram boundaries on the Al Haramain Expressway, it will include the project’s main headquarters, an exhibition area, university, electronic gate centre, library, printing press, translation centre, hotels and other facilities.
Apart from meeting the accommodation requirements of pilgrims, Saudi Arabia has been keenly looking at addressing the problems of traffic congestion in the cities and facilitating the movement of pilgrims between Makkah and Madinah.
Key projects in this regard are the Haramain High-Speed Rail (HHR), which connects Makkah and Madinah and the proposed Makkah metro.
Work on the 450-km HHR, which is being implemented at an estimated cost SR37.5 billion ($10 billion), is reported to be 80 per cent complete. The project, which is already two years behind schedule, is now expected to have a phased opening with the first section due to be commissioned by the end of 2015 (see separate article).
Meanwhile, the proposed multi-billion-dollar Makkah metro also called Makkah Mass Rail Transit (MMRT) or Mashair project is expected to be launched in mid-2015, with trial operations slated for 2017 and full commissioning expected by early 2020. The project involves the construction of 88 train stations, including 22 underground depots, in addition to a four-line rail network extending around 182 km.
Makkah Municipality is working on the estimated $2-billion Phase One of the metro, which will cover 45.1 km and include 22 stations. It will be developed in two sections. Section One will consist of a 20.3-km above-ground metro line with 10 stations and a depot. Section Two consists of the construction of mainly an underground 24.8-km metro line, 12 new stations, and other related facilities.
This apart, the Saudi Ministry of Transport (MOT) is building a large network of roads in and around Makkah worth millions of dollars. Among them are phases One and Two of a 600-km-long road from Al Qassim to Makkah; Phase One of the 20-km Jeddah-Makkah Expressway, costing $36 million; and 94 km of roadworks related to the Jeddah-Jazan coastal highway.
According to a recent survey by Viability Management Consultants (VMC), Makkah plans to develop 13,724 keys until 2019, next only to Dubai in the UAE. According to another survey by STR Global, some 6,927 rooms are currently under construction in Makkah.
Many of the new hotels that are opening are massive in scale. For instance, the Anjum Hotel was opened last September with 1,743 rooms. The hotel’s opening also marks the launch of the first phase of the Jabal Omar real estate project.
Anjum Hotel is the flagship hotel of the diversified Abdul Latif Jameel Real Estate Investment Company (ALJREIC).
Several of the world’s leading hotel chains currently have significant numbers of hotels under development in Saudi Arabia, notably Starwood Hotels & Resorts and Carlson Rezidor. Starwood Hotels and Resorts has several properties in the pipeline including the Sheraton Makkah and The Westin Makkah (both scheduled to open in July 2015). These will be followed by the Four Points by Sheraton Makkah (July 2016).
The government has also embarked upon ambitious plans for Madinah – the second holiest place for Muslims after Makkah – the largest of which is the expansion of the Prophet’s Mosque. Upon completion in 2040, the capacity of the mosque will be boosted from 600,000 to 1.6 million people.
Work is currently ongoing on clearing areas surrounding the mosque. Ninety-five properties and 126 mosques in total will be razed to make way for its expansion, according to the Saudi Gazette.
Among other key developments, Saudi Arabia’s King Abdullah has given the go-ahead to the finance ministry to implement the massive $13.32-billion pilgrim city project. The city for 200,000 people featuring 100 towers will be located 3 km west of the Prophet’s Mosque and will occupy an area of 1.6 million sq m. Some 20 of the towers will be used for administrative purposes and 80 will be residential. The development will also include 76 four-star hotels and six five-star hotels, accommodating 40,000 people. It will also have a 400-bed hospital and a railway and bus station. The project is being financed by the state-owned Public Investment Fund, and will be implemented in three phases.
Work on the first phase is already under way, according to the Arab News. This phase will cost $880 million, while Phase Two work is valued at $719 million.
Another prestigious project is the new Prince Mohammed bin Abdulaziz International Airport, the first phase of which is expected to be complete early next year.
The airport is being expanded to accommodate nearly eight million passengers annually in the first phase, with subsequent phases designed to increase capacity to 12 million passengers a year and eventually 27 million people. Phase One work includes the construction of a second terminal, a new passengers’ lounge, a new commercial area and expansion of the existing second runway.
The project is the first of its kind in Saudi Arabia to be developed under a build-operate-transfer (BOT) contract signed in October 2011.
Madinah will also be home to one of the 11 stadiums to be built in the kingdom by Saudi Aramco at a cost of $4.4 billion. These stadiums, which will have a capacity of 45,000 spectators, will be built on the lines of the hi-tech King Abdullah Sports City located 50 km from Jeddah (see separate article Page 22).