Kingdom Holding has signed a 4.6 billion Saudi riyals (Dh4.5bn) deal with Saudi Binladen Group to build the world's tallest tower, in Jeddah, signalling a restart of the race to push the boundaries of super-tall buildings.
The Jeddah tower would be more than 1km tall and include a hotel, apartments and offices, the company announced yesterday. The Burj Khalifa in Dubai, currently the world's tallest building, is 828 metres tall.
Completion of the Burj Khalifa last year was the culmination of an unprecedented flurry of tower construction. Seven of the 10 tallest buildings in the world were built from 2004 to 2010, including six in the past three years.
But the competition to surpass the Burj Khalifa stalled in recent years. Plans to build a 1km tower in Kuwait never progressed. A proposal by Nakheel, the UAE developer, to build a 1km tower in Dubai was also shelved.
Kingdom Holding first announced Kingdom Tower in 2008 as part of the scheme for Kingdom City, a development covering 530 hectares north of Jeddah. Plans call for the development to house more than 80,000 people and recreational facilities around a series of lakes and man-made canals.
In 2009 Kingdom Holding announced Dubai's Emaar Properties would develop and supervise construction of Kingdom City and Kingdom Tower. An Emaar spokeswoman declined comment yesterday.
Kingdom Holding is controlled by Prince Alwaleed bin Talal bin Abdulaziz Al Saud, one of the world's richest men.
Prince Alwaleed is a major investor in some of the biggest companies in the world, including Citigroup, Apple, Pepsico, Procter and Gamble and Four Seasons Hotels.
Kingdom Holding is also the second-biggest shareholder in News Corp, the media conglomerate currently at the centre of the phone hacking scandal in the UK.
Prince Alwaleed has refused to specify the exact planned height of the Kingdom Tower to avoid tipping off competitors.
"I don't want to say right now," the prince said in 2008. "To do so would give other developers a specific height to surpass."
Since then Kingdom officials have consistently denied reports the tower had been cancelled. Some analysts question if the project makes economic sense.
"I'm not sure whether a tower that tall is needed in the Jeddah market," said John Harris, the co-head of the Saudi Arabia office for Jones Lang LaSalle, the consultancy.
"I think while Kingdom City is going to be very attractive, I'm not sure there is the depth of demand for office and residential space that tall."
Tall buildings typically succeed in dense urban areas. In Saudi Arabia the cities are sprawling and there is plenty of land available for development.
"The economics of super-tall towers is dubious at best," said David Le Bail, the director of consulting for DTZ, a property firm.
Construction costs soar as buildings get higher.
"To justify construction costs you need high revenue," Mr Le Bail said. "Typically you get high revenue in dense cities where land is at a premium."
But there is more involved in the decision to build a super-tall tower than economics, analysts note.
Tall towers "bring attention to not just the building but all the parties involved and the city and the country", said William Maibusch, the country representative in Qatar for the Council on Tall Buildings and Urban Habitat. "There is a lot of positive spin off."
Adrian Smith + Gordon Gill Architecture, based in Chicago, created the design for the Kingdom Tower. Mr Smith worked on the design for Burj Khalifa when he was a design partner at Skidmore, Owings & Merrill.
The tower will include the "world's most sophisticated elevators", Kingdom Holding said. Elevators serving top floors will travel at 10 metres per second in both directions.
As part of the deal to build the tower, Binladen Group is taking a 16.63 per cent ownership share in the Jeddah Economic Company, the entity established to build the tower. Kingdom Holding and the Abrar International Holding Company each control 33.35 per cent stakes in the company.
The Binladen Group has invested 1.5bn riyals into the Jeddah Economic Company, Kingdom Holding said.