The Impact of Saudi Giga Projects and Mixed-Use Developments on Urban Planning and Community Growth

Introduction

Saudi Arabia's ambitious Giga projects are reshaping the landscape of urban development and community growth. These monumental initiatives, characterized by their scale and innovation, promise to transform cities into modern, mixed-use hubs that integrate residential, commercial, and recreational spaces. This article explores how these projects impact urban planning and community development, drawing insights from a recent panel discussion featuring experts from Knight Frank, JLL, Coldwell Banker and SANA Engineering corrently working on Saudi Arabian market.

The Rise of Saudi Giga Projects

Saudi Arabia's Giga projects, such as NEOM, Red Sea Project, and Qiddiya, represent a bold vision for the future. These projects are not just about creating new cities but about pioneering urban environments that blend cutting-edge technology with sustainable living. The scale of these developments provides a unique opportunity to integrate mixed-use spaces seamlessly, enhancing both functionality and quality of life.

Insights from the Panel Discussion

Several key insights were shared regarding the impact of Saudi Giga projects and mixed-use developments on urban planning and community growth. Below is a summary of questions posed and responses provided by each panelist.

1. Unique Investment Opportunities in Saudi Giga Projects

Question by Elena Boheme: What are the unique opportunities for investors in Saudi Giga projects like NEOM and Diriyah?

Response by Terence Starr:

• NEOM is ultra-modern, with enormous scale and ambition, offering long-term investment potential despite its complexity.

• Diriyah reflects traditional Saudi values, providing unique opportunities for investors focused on cultural and historical integration.

• Investments in large districts, such as the recent one for China State, showcase the rapid transition from investment to implementation.

• Al Ula and other emerging projects continue to seek investors, indicating a broad array of opportunities in Saudi Giga projects.

  
  

2. Strategic Value in Less Publicized Projects

Question by Elena Boheme: What is the strategic value in investing in less publicized initiatives like Green Riyadh or Saudi Downtown Company?

Response by Mohamad Rabih Itani:

Each project under Saudi Arabia's Vision 2030 holds significant value, whether high-profile like Neom or less publicized ones like Green Riyadh and Saudi Downtown Company. The overarching goal of Vision 2030 is to enhance the quality of life for residents and offer exceptional experiences for visitors.

·       Green Riyadh: This project is a critical part of Vision 2030, aiming to transform Riyadh into a more sustainable and livable city. By planting 7.5 million trees and developing extensive parks and green corridors, Green Riyadh will improve air quality, reduce temperatures, and create a healthier urban environment. This initiative not only boosts Riyadh’s aesthetic appeal but also contributes to its status as a global city while addressing environmental challenges.

·       King Salman Park: As a flagship project, King Salman Park will be one of the largest urban parks in the world, covering 13.4 square kilometers. It will feature cultural, recreational, and sports facilities, making it a central hub for social, environmental, and economic activities. The park is set to enhance the quality of life for Riyadh’s residents and support sustainability and urban development.

·       Saudi Downtown Company: This initiative involves the development of 11 projects focused on preserving Saudi Arabia’s culture and heritage. It complements the broader Vision 2030 goals by enhancing urban infrastructure and contributing to economic growth.

These less publicized projects are integral to achieving Vision 2030, as they support the country’s environmental, social, and economic objectives. They are crucial for improving the quality of life, fostering sustainability, and driving economic development, complementing the more prominent initiatives.

 3. Opportunities for the Hospitality Sector in Saudi Arabia

Question by Elena Boheme: What are the opportunities for the hospitality sector to contribute to Saudi Arabia’s goal of becoming a global investment powerhouse?

Response by Youssef Khattar:

To understand the opportunities in Saudi Arabia's hospitality sector, it’s crucial to analyze each city individually due to their distinct market dynamics.

• Riyadh: The capital city presents significant investment potential. According to the Tourism Development Fund and the Ministry of Tourism, there is a projected increase in demand from 40,000 to 80,000 hotel rooms over the next five years. This translates to the need for an additional 40,000 rooms, or approximately 1,800 new hotels. This demand will drive growth in construction, supply chains, and related industries, creating numerous investment opportunities.

• Makkah and Madinah: These cities cater predominantly to Hajj and Umrah travelers, creating a different market compared to Riyadh. While these destinations have specific needs, they should be analyzed with a focus on religious tourism rather than broader Vision 2030 goals.

• Remote Areas: Regions like Asir and Al-Ahsa require seasonal hotels to accommodate travelers. The government is actively working to attract investors through initiatives such as financial incentives and land grants.

• Giga Projects: Major projects like Neom and Qiddiya, supported by the Public Investment Fund (PIF), are transforming the landscape. Riyadh stands out as the largest market, with Jeddah also offering notable opportunities. The hospitality sector can benefit from these mega-projects through increased demand from business travelers, long-term project engagements, and eventual tourism growth.

  
  

In Riyadh, there are three key demand drivers for the hospitality sector:

1. Business Travel: The city is increasingly attracting business visitors due to ongoing and future mega-projects, as well as events and conferences.

2. Local Demand: Riyadh Seasons and other local events draw Saudis from other cities for business and family visits.

3. Tourism: Once mega-projects like Diriyah and Qiddiya are completed, tourism will become a more significant driver for hospitality.

   
   

Overall, the hospitality sector in Saudi Arabia has immense potential to contribute to the country's vision of becoming a global investment powerhouse, with substantial opportunities driven by both current demand and future growth.

4. Differences Between Luxury and Lifestyle Projects in Technology and Sustainability

Question by Elena Boheme: How do luxury and lifestyle projects differ in technology use and support sustainable practices?

Response by Zaid Samha:

• Luxury projects focus on high-end features, while lifestyle projects emphasize comfort and sustainability.

• Lifestyle projects integrate natural elements, enhancing quality of life and comfort.

• Nature-inspired designs like indoor parks are gaining traction but are not yet widespread.

• Technological advancements and sustainable practices are crucial, but the market lacks sufficient nature-inspired projects.

  
  

5. Economic and Social Contributions of Different Hotel Classes

Question by Elena Boheme: How do 3-star, 4-star, and 5-star hotels each contribute to Saudi Vision 2030’s economic and social objectives?

Response by Mohamad Rabih Itani:

• 5-star hotels attract high-net-worth individuals and business travelers, offering premium experiences.

• 4-star hotels cater to budget-conscious travelers and contribute significantly to the hospitality sector.

• 3-star hotels are found in smaller cities and support economic diversification.

• The focus on 5-star hotels currently overshadows other categories, but there is growing demand for 4-star hotels.

  
  

6. Challenges in Bringing Design and Technical Briefs to Reality

Question by Elena Boheme: What are the challenges in translating design and technical briefs into reality?

Response by Terence Starr:

Translating design and technical briefs into reality presents several challenges:

1. Logistics and Access: Working in remote or isolated areas, like Neom, highlights the significant challenge of logistics. Limited access to roads, railways, and airports can complicate the delivery of materials and workforce. Efficient logistics solutions are crucial to overcoming these barriers and ensuring that construction materials reach the site on time.

2. Modularization: One effective approach is modularization, which involves building components off-site and assembling them on the main site. This method not only addresses logistical challenges but also helps in reducing construction time and costs. Modular construction can lead to significant economic and environmental benefits.

3. Carbon Footprint: The carbon footprint of construction methods is a major concern. In the U.S., it's been observed that approximately one-third of the carbon emissions come from logistics and transportation. Minimizing these emissions through innovative construction practices can enhance both economic and environmental value.

4. Innovation: New technologies and materials are emerging to address construction challenges. For instance, companies are developing advanced concrete that uses less material compared to traditional methods, making it more cost-effective and sustainable. Additionally, the use of pre-cast piles and modular building techniques can improve efficiency and safety.

Overall, addressing these challenges requires a combination of innovative solutions, efficient logistics, and sustainable practices to effectively bring design and technical briefs to life.

7. Feasibility Study Points in Hospitality Projects

Question by Elena Boheme: What are the key points in a feasibility study for hospitality projects?

Response by Youssef Khattar:

When we are conducting a feasibility study for our clients for hospitality projects, we consider the following key points:

1. Site Analysis and Location: For new hotel developments, location is crucial. Analyze the proximity to key attractions, business districts, and transportation hubs. The location will influence the type of hotel that is appropriate, such as 3-star, 4-star, or 5-star.

2. Hotel Brand Selection: Decide whether the hotel will be branded locally or internationally. International brands often have more stringent requirements, which can increase capital expenditure (capex). This decision impacts the overall budget and operational requirements.

3. Financial Study: Assess the development costs and potential return on investment (ROI) and Rate of Return (ROR). Investors typically seek a minimum ROR of 13-14% for new built hotel projects. For existing hotels, operational ROR ranges from 6.5% to 8%, depending on the market segment—luxury or more economical.

4. Timeline and Payback Period: Plan for a construction period of approximately 3 years and an operational timeline of 5 years. This results in a payback period of not earlier that 7 years or more, depending on project specifics and financial performance.

   
   

These elements provide a comprehensive framework for evaluating the viability and financial potential of hospitality projects.

8. Target Technology Solutions in Real Estate and Hospitality Projects

Question by Elena Boheme: What target technology solutions are used in large-scale real estate and hospitality projects, and how do they balance cost efficiency and quality?

Response by Zaid Samha:

• BIM and CFD solutions, along with AI tools for air quality, are prevalent.

• Technology must be recommended and integrated to address project needs and avoid mistakes.

• Coordination and project management are crucial for successful implementation.

  
  

9. The Role of Project Management in Saving Time and Budget

Question by Elena Boheme: Do investors and stakeholders understand the value of investing in good management and how it affects time and budget?

Response by Youssef Khattar:

• Hospitality projects are complex and require extensive coordination among various consultants.

• Project management is essential to handle coordination and procurement, ensuring efficiency and cost-effectiveness.

• Investing in good management and technology can save costs in the long run.

  
  

10. Human Capital and Education in Giga Projects

Question by Elena Boheme: What are the demands on human capital and education systems due to Giga projects?

Response by Terence Starr:

• Human capital needs include technical knowledge and skilled labor.

• Educational programs are crucial for preparing the next generation to handle complex projects.

• Hands-on experience and practical skills are invaluable, providing real-world learning opportunities beyond traditional education.

As we witness the transformative impact of Saudi Giga projects and mixed-use developments on urban planning and community growth, it's clear that these initiatives are setting new standards for innovation and sustainability. My company Metrix Projects, is here to answer KSA hopitality project development needs. We are excited to be at the forefront of this dynamic landscape, specializing in hospitality development and project management. We invite you to connect with us to explore how our expertise can help bring your project visions to life. Whether you’re seeking guidance on navigating these ambitious developments or looking to invest in future opportunities, our team at Metrix Projects is ready to collaborate and drive success. Let’s shape the future of urban development together—contact us to discuss how we can support your project goals.

www.metrix-projects.com or contact form on this website.