AL-BALAD

Jeddah
Project box

Geographical area: Middle East and North Africa

Location: JEDDAH, SAUDI ARABIA

City size: XL (above 5,000,000 inhabitants)

Promoter: Public Investment Fund (PIF)

Developer: Al Balad Development Company (BDC)

Start year:

End-year: In progress

Implementation phase: Implementation in progress

Project size: Neighborhood

Total area of intervention (in sqm): 2.500.000

Total investments (in USD): approximately 5 billions

Project overview

Al Balad is the historic core of Jeddah (Saudi Arabia) and part of the UNESCO World Heritage Site of Historic Jeddah, characterised by dense urban fabric, old-fashioned buildings, traditional markets (souks), and historic mosques dating back several centuries. Despite its cultural relevance as the traditional gateway for pilgrims travelling to Makkah, the district has faced progressive physical deterioration, underinvestment, infrastructure decay, and partial depopulation, alongside the loss of traditional economic functions.

To address these challenges, the Jeddah Historic District Program was launched in 2021 under Saudi Arabia’s Vision 2030, with the objective of transforming Al Balad into a major global heritage and touristic destination. In 2023, the Al Balad Development Company (BDC), fully owned by the Public Investment Fund (PIF), was created to act as the primary developer for the restoration, development, and long-term management of the regeneration process.

The project covers approximately 2.5 km² (2,500,000 sqm) and combines heritage conservation, urban regeneration, infrastructure upgrading, and new development. The intervention includes the restoration of hundreds of historic buildings, improvement of public spaces, upgrading of utilities and services, and the introduction of new uses such as hospitality, cultural venues, retail, and residential functions. The broader development strategy also foresees thousands of new residential units and hospitality facilities, alongside significant commercial and office space, repositioning the district within Jeddah’s contemporary urban economy.

A key component of the regeneration is the reactivation of local economic activities, particularly through the restructuring and reopening of street market areas to accommodate local craftsmen and small-scale commercial activities. These interventions aim to revive traditional trades and support local entrepreneurship, although their long-term sustainability will depend on whether they remain embedded in local production systems or become primarily oriented toward tourism consumption.

At the same time, the project has introduced significant public space transformations, including the pedestrianisation of large portions of the district. This shift prioritises walkability, improves safety, and enhances the overall quality of urban space, while also supporting commercial and cultural activities. 

Environmental and climatic considerations are addressed through urban design interventions, including the introduction of shaded areas, tree planting, and natural elements that create microclimatic “oases” within the historic city centre. These features contribute to thermal comfort and improve the usability of public spaces in a hot climate, although they appear to be implemented as localised design solutions rather than part of a broader environmental strategy.

The regeneration is also strongly linked to tourism development. Visitors have increased significantly, reaching millions annually, indicating that Al Balad is already re-emerging as a major destination within Saudi Arabia.

In 2026, the project is still ongoing, with no clearly defined completion date, although it is broadly aligned with the Vision 2030 timeline.

The regeneration of Al Balad involves a multi-functional and mixed-use urban fabric, where almost all functions placed in historic building are being restored, reactivated. While other buildings are partially reconfigured to support the district’s transition into a cultural and economic hub. Historically, the area was characterised by a dense combination of residential and commercial uses, with traditional houses, souks, and small-scale trading activities coexisting within a compact urban structure. The ongoing regeneration maintains this mixed-use character but is progressively rebalancing land uses toward commercial, cultural, and hospitality functions, driven by tourism development. Residential use remains present, particularly through the restoration of historic buildings originally designed as housing. However, many of these structures are being adaptively reused or upgraded, and their long-term role as primary residences appears to be evolving, with potential shifts toward short-term accommodation and mixed residential-commercial uses. Commercial functions are being significantly strengthened, especially through the revitalisation of traditional markets (souks), retail spaces, and the introduction of new businesses linked to tourism, gastronomy, and cultural industries. These activities are central to reactivating the local economy and increasing the district’s attractiveness. The project also enhances institutional and public buildings, including the restoration of historic mosques, cultural landmarks, and heritage sites, which are being reintegrated as active cultural and social assets within the district. These spaces contribute to the area’s identity while supporting cultural programming and public use. In terms of open space and recreational uses, the regeneration includes the upgrading of public spaces, streets, and plazas, improving walkability and creating areas for social interaction, events, and tourism activities. These interventions are particularly relevant in a dense historic fabric where open space was previously limited or underutilised. Finally, transportation functions are being addressed through infrastructure improvements and a stronger emphasis on pedestrian accessibility within the district.

Benefits

The regeneration of Al Balad is strongly oriented to increase economic vibrancy and investments, with tourism enhancement acting as the primary driver. 

First, the adaptive reuse of historic buildings and the introduction of new hospitality, retail, and cultural amenities, is significantly increasing the area’s attractiveness. This is reflected in the rapid growth of visitors, reaching several million annually, which in turns supports local businesses in sectors such as food, retail, events, and tourism services. Moreover, the development of hospitality, cultural venues, and visitor services is expected to create additional jobs in tourism, reception, and service-related activities.

A key component of this economic revitalisation is the reactivation of traditional commercial streets and souks, where spaces have been reorganised to accommodate local craftsmen and small-scale entrepreneurs. By enabling artisans to sell their products within the historic district, the project contributes to the revival of local economic activities, supports the continuity of traditional crafts, and generates employment opportunities linked to artisanal production and retail. This process is further supported by the allocation of commercial spaces to local businesses under regulated or subsidised rental agreements, which helps lower entry barriers and enables local actors to participate in the emerging economy of the district. While these measures can strengthen local economic inclusion and support small-scale entrepreneurship, their long-term effectiveness will depend on their stability over time and their ability to withstand increasing market pressures.

Moreover, construction and restoration works, which are carried out mainly by local companies and contractors, generate employment opportunities, contributing to support local economy and families incomes, alongside the development of skills related to heritage restoration and construction.

Nevertheless, the project primarily focuses on an investment-driven and tourism-based economic model, raising questions about diversification and long-term sustainability.

The environmental impact of the Al Balad regeneration is mainly associated with resource efficiency and climate-responsive urban design interventions. The restoration and adaptive reuse of historic buildings extend the lifecycle of existing materials and structures, reducing demolition waste and limiting the need for new construction materials. This aligns with principles of circularity and contributes to a more resource-efficient form of urban development compared to large-scale redevelopment.

In addition, the project incorporates climate adaptation measures through the introduction of shaded areas, tree planting, and natural elements within public spaces. These interventions help mitigate heat exposure, improve thermal comfort, and create microclimatic “oases” in the dense urban fabric, enhancing the usability of outdoor spaces in a hot climate.

Pedestrian-friendly spaces and infrastructure upgrades also support more sustainable mobility patterns within the district, reducing reliance on motorised transport at the local scale. 

However, there is limited evidence of explicit strategies targeting greenhouse gas emission reduction, climate adaptation, or biodiversity enhancement. Moreover, the strong emphasis on tourism growth could increase environmental pressures, particularly in terms of energy consumption, waste generation, and transport-related emissions. As a result, while the project incorporates some environmentally beneficial practices, its overall environmental impact appears secondary and less systematically addressed compared to its economic objectives.

The project contributes to social outcomes primarily through public space enhancement, cultural activation, and urban services enrichment, which together aim to increase livability and urban attractiveness. 

The restoration of historic buildings, the creation and revitalisation of public spaces, and the reactivation of street markets (souks), reinforce the district’s role as a cultural and social hub, encouraging greater public use and interaction. Specific measures have been introduced to support local businesses and artisans within the regeneration process. In particular, some commercial spaces have been allocated to local operators, with the aim of sustaining traditional economic activities and promoting local culture to visitors. These arrangements are reportedly supported by regulated or subsidised rental agreements, designed to make spaces accessible to local actors and reduce financial barriers to participation. Such mechanisms contribute to maintaining a degree of local economic continuity and cultural authenticity within the district.

This can indirectly improve public safety, as increased activity and the presence of people in streets tend to reduce perceived insecurity in previously underused areas. A significant intervention in this regard is the pedestrianisation of large portions of the district, which reduce traffic-related risks and increasing passive surveillance through higher pedestrian presence. At the same time, pedestrianisation enhances the quality of urban amenities, making streets more accessible, comfortable, and suitable for social activities, events, and everyday use.

However, when assessed against criteria of social equity and inclusiveness, the project presents some limitations. The regeneration appears to follow a top-down, investment-led model, with limited participatory planning processes. As property values and tourism pressures increase, there is a potential risk of gentrification and displacement, which could undermine long-term social sustainability.

Al Balad (Historic Jeddah) has been a UNESCO World Heritage Site since 2014.

Finance model

The Jeddah – Al Balad Regeneration Project is primarily financed through public funding, led by Saudi Arabia’s Public Investment Fund (PIF), a sovereign wealth fund owned by the state that acts as the main financial driver of the initiative. The overall investment associated with the regeneration is estimated at approximately USD 5 billion, although this figure is not consistently confirmed across official sources and should therefore be considered indicative. The establishment of the Al Balad Development Company (BDC) in 2023, as a PIF-owned entity, reflects a governance model in which public capital is channelled through a corporate structure to oversee development, investment, and long-term operations within the district. The project can therefore be interpreted as a state-led investment strategy with elements of equity financing, where PIF operates similarly to an institutional investor, using equity-based financing instruments rather than relying on traditional public expenditure alone. In addition to direct public investment, the project is designed to attract private sector participation, particularly in the development and operation of hospitality, retail, and mixed-use assets. However, available evidence suggests that private actors are involved mainly at the implementation and operational level, rather than as primary co-financiers sharing upfront risks. Alongside these investment flows, the project incorporates supportive financial arrangements aimed at local economic inclusion, such as the allocation of commercial spaces to local businesses under regulated or subsidised rental agreements. While not a primary funding source, these mechanisms function as indirect financial support, lowering entry barriers for local actors and enabling their participation in the regenerated district’s economy.

The regeneration is primarily supported through equity-based financing, with the Public Investment Fund (PIF) directly investing capital in the project through the Al Balad Development Company (BDC), its owned entity. This approach reflects an equity financing state-led investment strategy, where public funds are directly invested in large-scale urban regeneration and are expected to generate returns through future revenues from tourism, real estate, hospitality, and commercial activities. In addition, the project implicitly relies on land value capture mechanisms, as public investment in infrastructure, heritage restoration, and place-making is expected to increase land and property values. These increases can be monetised through leases, concessions, and development rights managed by BDC, aligning with the model of public land as an equity contribution toward development. There is no clear evidence of the use of debt-based instruments (such as bonds or loans), grants from international organisations, or participatory financing tools (e.g. crowdfunding or participatory budgeting). The financing structure appears to be predominantly state-driven, investment-oriented, and centrally managed, rather than diversified across multiple financial instruments.

References and Credits