Construction activity across the Gulf region remains robust, supported by strong project execution and rising demand for building materials, according to new research released by engineering consultancy AESG.
New research from AESG, backed by tender return data, confirms sustained construction activity across the region, a market with $951 billion in projects currently under active execution according to MEED.
Concrete supply grew 13% between Q4 2025 and Q2 2026, a strong indicator of continued market momentum. Alongside this growth, cost benchmarks have adjusted, with concrete works up 13% and reinforcement steel up 16% over the same period, reflecting broader movements in global commodity and logistics markets, stated AESG in its Middle East Market Intelligence Report whose benchmarks are based on actual tender returns from Q4 2025 through Q2 2026.
These figures are corroborated by commodity index data, which shows the rebar index up 6% and oil and aluminium indices surging 20% and 21% respectively since Q4 2025, with both curves climbing sharply from January 2026 onwards, it added.
"The data we are seeing reflects a market absorbing real and sustained cost pressure, but one that retains the capacity and ambition to deliver. These findings are a prompt for rigour, not retreat," remarked Saeed Al Abbar, CEO of AESG.
"Developers who engage now with accurate, up-to-date benchmarks will be far better placed to make confident investment decisions and protect viability as conditions evolve," he added.
Managing cost uplift across the build programme
On the hospitality sector, AESG said the cost pressure lands unevenly across asset classes. Its benchmarking data shows hospitality as already the most capital-intensive category in the GCC, with resort-class developments ranging from AED15,000 to AED20,000 per sq m in the UAE and SAR16,500 to SAR23,000 per sq m in KSA.
An 11 to 16% uplift in concrete and reinforcement costs, two of the most foundational line items in any hotel build, means that feasibility studies completed as recently as late 2025 could benefit from being revisited against current benchmarks to support confident investment decision-making.
Recalibrating for an evolving cost environment
Another theme that runs strong through AESG's data is the divergence between the cost profiles of the UAE and the Kingdom of Saudi Arabia.
According to experts, KSA benchmarks are notably higher across residential villas and all hospitality tiers. This reflects the structural realities of building at scale in a market that is more dependent on imported materials and longer, more extended supply chains.
Securing supply chains in line with the ambition of the giga project build out will be a key risk mitigation metric across the kingdom, they stated.
The broader macroeconomic context reinforces the importance of robust project planning. Third-party forecasters have adjusted GCC growth projections for 2026 in line with shifting global market conditions.
For KSA in particular, AESG's data supports the ongoing approach of pressure-testing assumptions against current benchmarks, an approach that positions developers to move decisively as market conditions continue to evolve.
Market recalibrating, not retreating as supply holds firm
Underpinning this activity, AESG's data shows supply keeping pace with demand. Cement supply increased by 4% and average concrete supply by 13% between Q4 2025 and Q2 2026, a sign of a market that is active, competitive, and well-resourced.
"The region's infrastructure ambitions, population growth dynamics, and long-term tourism and economic diversification goals have not changed," stated Al Abbar.
"What has evolved is the cost environment in which those ambitions are currently being executed. Against a backdrop of nearly $1 trillion in active GCC construction, the fundamentals of this market are not in question. What this data tells us is that the developers who move with the right benchmarks today will be the ones best positioned to deliver on those commitments tomorrow," he added.-TradeArabia News Service