The Saudi Arabia's commercial real estate market is valued at around USD 72 billion in the current year and is anticipated to register a CAGR of more than 10% during the forecast period.
Retail destinations recorded an increase in footfall as the Saudi government began to ease restrictions on restaurants, cafes, and cinemas. With the growth of e-commerce, shopping centers have to shift their focus to enhance customer experiences. Developments are positioning their assets among other strategies to improve their entertainment and F&B offerings. If executed properly, such changes can add value by attracting greater levels of footfall.
Although there may be some delays in the handover of the retail spaces, most of this stock was expected to be of high-quality shopping centers with strong entertainment and food and beverage elements. These include retail centers such as Qurtoba Boulevard, River Walk Center, and Shorofat Al Nada Park, which come as developers in the Kingdom and look to differentiate their products to secure a large consumer base.
Additionally, the average rent for premier office space increased by 18% in the previous 12 months to USD 472 (1,775 riyals) per square meter.
The average rent for Grade A office space in Jeddah increased by 6.5 percent over the previous year to USD 283 (1,065) per square meter, indicating that the city's leasing market is also on the rise.
In the second city of Saudi Arabia, Grade A offices are currently 92 percent filled, while Grade B occupancy is 80 percent.
In Jeddah, in upcoming years, a large amount of potential office space could be released to the market, the majority of which is Grade A (60%-70%), while an additional 30% of the stock is set to come online in smaller projects along major arterial routes. A prime scheme in the pipeline is Jeddah Gate, which is a master plan development by Emaar. The development will offer nearly 230,000 sq. m. of high-quality office space within a mixed-use environment.
In the longer term, it is anticipated that the demand for office space will pick up from the current levels as economic reforms under the National Transformation Plan (NTP) and Vision 2030 start getting implemented and benefit the economy.
Moreover, various urban regeneration initiatives, including mixed-use communities and large-scale infrastructure projects, are also expected to act as a catalyst for the commercial real estate market. Furthermore, it is expected that the planned wave of privatization will boost investment and foster growth in the business environment, creating favorable conditions for the office sector.
Key Highlights
- Saudi Arabia’s real estate market has begun to show an overall improvement in business activity following a downturn caused by the COVID-19 pandemic. The government of Saudi Arabia, in response to the pandemic, is implementing various initiatives to contain the economic fallout and protect the Kingdom’s economy.
- The oil sector grew 9% year-on-year, while the non-oil economy expanded by 6.2%. The continued government spending on giga-projects, coupled with increasing developments in the entertainment sector, is likely to stimulate demand in the commercial real estate market in Saudi Arabia.
- With conditions remaining soft across most of the commercial real estate sectors of the market in 2022, the hospitality industry witnessed several major development announcements. According to STR data, Saudi Arabia is leading the world in hotel supply growth.
- As part of Vision 2030, the government has also launched international tourist e-visas in Saudi Arabia to boost tourism in the country and increase global competitiveness, which is set to positively impact the Kingdom’s real estate market.
- The office market, however, remained slightly under pressure across the major cities in Saudi Arabia. However, with the improving economic conditions in the country, it is expected that in the medium to long term, corporate demand will pick up as business conditions improve, owing to various new projects such as Riyadh’s 176.7 km metro and Dammam’s King Salman Energy Park (SPARK). In addition, increased investment opportunities and the ease of travel stimulated by the new King Abdulaziz International Airport (KAIA) are also expected to positively affect commercial real estate expansion, especially in Riyadh, as it remains the primary business center of the western region.
Saudi Arabia Commercial Real Estate Market Trends
Rise in the retail sector in Riyadh driving the market
The retail real estate market in Saudi Arabia, particularly in cities like Riyadh, is witnessing developments that have transformed the retail market, which consists of various outlets ranging from high-end dining to fast-food restaurants, in addition to luxury brands that were once absent from Riyadh’s retail scene.Retail destinations recorded an increase in footfall as the Saudi government began to ease restrictions on restaurants, cafes, and cinemas. With the growth of e-commerce, shopping centers have to shift their focus to enhance customer experiences. Developments are positioning their assets among other strategies to improve their entertainment and F&B offerings. If executed properly, such changes can add value by attracting greater levels of footfall.
Although there may be some delays in the handover of the retail spaces, most of this stock was expected to be of high-quality shopping centers with strong entertainment and food and beverage elements. These include retail centers such as Qurtoba Boulevard, River Walk Center, and Shorofat Al Nada Park, which come as developers in the Kingdom and look to differentiate their products to secure a large consumer base.
Demand for office spaces is likely to increase across key cities in Saudi Arabia
The occupancy rate for Grade A office space, which stands out for its coveted location and top-notch infrastructure, is 98 percent, while the occupancy rate for Grade B office space is 75 percent, which is the highest level in five years.Additionally, the average rent for premier office space increased by 18% in the previous 12 months to USD 472 (1,775 riyals) per square meter.
The average rent for Grade A office space in Jeddah increased by 6.5 percent over the previous year to USD 283 (1,065) per square meter, indicating that the city's leasing market is also on the rise.
In the second city of Saudi Arabia, Grade A offices are currently 92 percent filled, while Grade B occupancy is 80 percent.
In Jeddah, in upcoming years, a large amount of potential office space could be released to the market, the majority of which is Grade A (60%-70%), while an additional 30% of the stock is set to come online in smaller projects along major arterial routes. A prime scheme in the pipeline is Jeddah Gate, which is a master plan development by Emaar. The development will offer nearly 230,000 sq. m. of high-quality office space within a mixed-use environment.
In the longer term, it is anticipated that the demand for office space will pick up from the current levels as economic reforms under the National Transformation Plan (NTP) and Vision 2030 start getting implemented and benefit the economy.
Moreover, various urban regeneration initiatives, including mixed-use communities and large-scale infrastructure projects, are also expected to act as a catalyst for the commercial real estate market. Furthermore, it is expected that the planned wave of privatization will boost investment and foster growth in the business environment, creating favorable conditions for the office sector.
Saudi Arabia Commercial Real Estate Market Competitor Analysis
The Saudi Arabia Commercial Real Estate Market is highly fragmented and highly competitive. The demand for new properties is increasing due to growth in commercial activities and an increase in competition. Some of the significant real estate development companies operating in Saudi Arabia are Al Saedan Real Estate, Kingdom Holding Company, SEDCO Development, Jabal Omar Development Company, Makkah Construction & Development Co., Dar Alaskan Real Estate Development Co., and Saudi Taiba Investment and Real Estate Development Co. Competition among developers majorly happens on parameters such as land banks, location of the property, upcoming projects, construction costs, the reputation of the company, and other parameters.Additional Benefits:
- The market estimate (ME) sheet in Excel format
- 3 months of analyst support
Table of Contents
1 INTRODUCTION
4 MARKET INSIGHTS
5 MARKET DYNAMICS
6 MARKET SEGMENTATION
7 COMPETITIVE LANDSCAPE
Companies Mentioned (Partial List)
A selection of companies mentioned in this report includes, but is not limited to:
- Developers
- Other Companies (Real Estate Brokerage Firms, Startups, Associations, etc.)
Methodology
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