The boss of a $95 billion city being built in Saudi Arabia says that it has attracted more white-collar workers, companies and increased its population by 70 percent over the last year.
Fahd Al-Rasheed, CEO of the King Abdullah Economic City (KAEC) said in an interview with Business Insider that while there were challenges over 2016 in the building sector, it had attracted more companies to expand their businesses there as well visitors too.
“Population growth is increasing as more companies open in the city and as the city’s reputation as a tourism and entertainment center grows,” Al-Rasheed told BI.
“We welcomed more than 160,000 visitors to the city in 2016, attracted by the many events and festivals that are hosted by or held in KAEC. That visitor traffic is a key element in attracting people to live and invest in KAEC and we saw the population increase by almost 70 percent in 2016 to exceed 7,000 people. We are a Saudi city and the majority of our population growth is from the domestic market, though we remain a very multi-cultural community.
“Our plan for 2017 is to double the number of people visiting the city. This, along with an expected improvement in investor sentiment toward real estate, will drive continued population this year.”
The KAEC was initially announced by King Abdullah bin Abdulaziz Al Saud in 2005. The project is not expected to be completed until 2035. Plans call for the city to eventually have 2 million residents across 70 square miles — the equivalent of Washington, D.C. So at the moment, while it KAEC is growing, the population is still small, relative to its overall capacity.
But Al-Rasheed said that after some initial teething problems, the city is growing rapidly and os expected to host dozens of the world’s largest companies, including the automaker Volvo, and the pharmaceuticals firms Pfizer and Sanofi.
“The city is continuing to grow and is attracting a strong mix of local, regional and international business. We increased the number of tenants in our Industrial Valley by 26 percent in 2016 to more than 120 companies establishing operations in the city. The number of facilities either operational or under construction has increased by 23 percent and the number of companies that are now engaged in commercial operations has doubled since the beginning of 2016,” he said.
“In addition, we have started to attract more white-collar businesses to the city by offering a new corporate incentive package and we are focusing a lot of attention in 2017 on providing support and facilities for SMEs and entrepreneurial companies. And our growing reputation as a leading leisure destination in the Kingdom is attracting interest from companies engaged in the tourism and entertainment industries.”
Al-Rasheed said construction, which is naturally the linchpin element to building a city, was affected in 2016 but it seems the worst is behind it.
“2016 was a difficult year in Saudi Arabia for everyone and the real estate sector in particular was affected. Investor sentiment was low and that had an impact on sales for all companies. At KAEC our strong cash position enabled us to continue with development when others were pulling back and our private-sector status gave us a significant competitive edge. Like all companies we had to manage costs but we have weathered the revenue pressure with minimal impact on the overall profitability of the company,” he said.
“We built 6,700 properties in 2016, and there another 1,000 currently under construction, which is broadly in line with our development target. We signed Saudi Riyal (SAR) 1.4 billion in contracts in 2016, which was significantly higher than the industry average. The city currently has projects worth some SAR6 billion underway.
“Our master plan remains on track – 46 kilometres squared of the total city area is either currently developed or under development – and we have a very strong pipeline of projects coming on line in 2017. All of this has contributed to solid investor confidence in our progress. Our stock price increased by 44 percent in 2016, which is significantly better than the market or the sector performance.”