Riyadh – Mubasher: A recent report by CBRE Middle East indicated that the Saudi market has continued to benefit from the strong non-oil sector, which expanded by 4.3% in the year to the third quarter (Q3) of 2024.
Head of Research MENA, Matthew Green, said: “This has been further supported by the governments continued investment drive, which continues to attract global occupiers to set up operations in the Kingdom.”
Green added: “This has been to the significant benefit of real estate in Riyadh, with office occupancy rates close to capacity, and availability of quality residential properties, similarly tight. Whilst new supply will start to enter the market later in 2025, for now these dynamics are likely to persist.”
Office Sector
The report, titled Saudi Arabia Real Estate Market Review for the third quarter (Q3) of 2024, noted that in the office sector, Riyadh has remained the central focal point of occupier demand Q3-24 while other cities in the Kingdom, including Jeddah and Khobar, were slightly more subdued, in line with the government investment focus.
Leasing activity is being constrained by the acute lack of available office space for rent, particularly in Riyadh, where occupancy rates are running close to 100%. Accordingly, repurposing of other real estate uses has remained an ongoing trend, particularly within the retail sector which has more occupiable supply ready and available to lease, with conversion into flex and serviced offices a relatively straight forward process, as landlords look for quick fixes to the current dearth of office accommodation.
Rental averages have increased in Riyadh’s Prime, Grade A and Grade B segments by 6%, 14% and 19%, respectively, as undersupply continued to drive rental values higher.
In Jeddah, Grade A and Grade B office rentals increased by 5% and 21%, respectively.
Saudi Arabia’s residential market continued to demonstrate strong demand fundamentals, with annual improvements in sale transaction volumes across the main metropolitan areas of Riyadh, Jeddah, and Dammam.
In the 12 months to Q3-24, transaction volumes in Riyadh rose by 31% year-on-year (YoY) reaching 24,000 sales. The increase in Dammam was even higher, with growth of around 37% YoY for the same three-month period in 2023, rising to 3,200 transactions.
Jeddah’s increase was lower but still positive, rising by 7% to more than 9,000 transactions. Average villa price in Riyadh has risen by more than 5% in 12 months, with further value growth anticipated in 2025 as better-quality modern stock is completed and as supply and demand dynamics remain tight.
Villa sales values are currently averaging nearly SAR 6,000/sqm, with more room to grow in the coming quarters. The growth in apartments has been a little weaker at around 4% YoY, with rates now averaging close to SAR 5,000/sqm.
In Jeddah, values for apartment are slightly lower, averaging around SAR 4,027 per square metre. However, villas are notably higher at just over SAR 5,800/sqm.
Hospitality Sector
Looking at the hospitality sector, Saudi Arabia’s tourism industry has continued to experience solid growth, with a reported 60 million tourists recorded during the first six months (6M) of the year, but occupancy rates still soften slightly. However, Average Daily Rates (ADRs) and Revenue Per Available Room (RevPAR) continued to rise, up 2.30% and 0.7%, respectively.
The strongest market for occupancy growth was Dammam followed by Jeddah. With tourism firmly at the forefront of Vision 2030, as a vehicle for economic and social development, growth in annual visitor numbers is expected to be sustained through the remainder of the year, with expectations to comfortably better last year’s numbers.
Industrial and Logistics Sector
In Saudi Arabia’s industrial and logistics sector, The Saudi Authority for Industrial Cities and Technology Zones (MODON) has signed SAR 2 billion in new deals with ALBADDAD to establish two new industrial cities in Makkah and Al Kharj, which will help to boost the country’s exports, particularly into regional, African, and other western markets.
These investments form part of the wider National Industrial Development and Logistics Program, which was first launched in 2019, to develop the country’s energy, mining, industry, and logistics sectors and to establish Saudi Arabia as a regional and global hub for manufacturing, whilst also creating significant new jobs for nationals in the country.
