Saudi Arabia’s real estate sector is witnessing a rise in home ownership and retail occupancy as rents across the residential and office markets in Riyadh and Jeddah climb due to improved economic conditions and postive business sentiment, JLL revealed in its Q1 2022 KSA Market Overview Year Report.
The head of Research for MENA and Turkey at JLL, Khawar Khan, said: “Saudi Arabia’s real estate sector continued to show promising signs that it has turned a corner in the first quarter of 2022, with increasing tourist numbers helping to provide a boost to the hospitality sector, consumers returning to retail outlets, and more positive business sentiment driving demand for office space. We look forward to this trend continuing over the remainder of the year.”
Saudi residential market update
The kingdom’s residential sector saw an acceleration in the number of units completed in Q1 2022, helped by the government’s continued efforts to deliver housing in order to meet the needs and aspirations of its citizens.
The first quarter of the year saw the completion of 4,000 and 2,000 units in Riyadh and Jeddah respectively, partly driven by the Ministry of Housing’s various initiatives to increase home ownership in the kingdom to 70 percent by 2030.
Meanwhile, rents rose by 5 percent in Jeddah and by 3 percent in Riyadh in Q1 2022. On the same basis, sale prices in Riyadh rose by 5 percent and by 2 percent in Jeddah, the report stated.
Office market in Saudi Arabia
The performance of the office real estate market also picked-up across the kingdom, supported by improving economic conditions and rising business activity in the first quarter of this year.
Average rents in Riyadh across a basket of Grade A & B office buildings increased by 8 percent year-on-year, while Jeddah saw a smaller rise of 3 percent.
Riyadh’s market-wide vacancy rate edged down to 4 percent in Q1 2022 from 5 percent a year ago. Over the same period, the average vacancy rate for Jeddah dropped by 8 percentage points to 11 percent.
This was mainly driven by a combination of rising demand from semi-government entities, private businesses taking on more floor space, and tenants re-locating from the south to better quality buildings in other locations across the city.
Hospitality real estate in Riyadh and Jeddah
In the hospitality market, Riyadh hotel occupancy jumped to over 71 percent in the first two months of 2022 compared with almost 51 percent in the corresponding period of 2021.
Jeddah’s hotel occupancy rose by 2 percentage points to 46 percent over the same period.
According to the JLL report, the kingdom is expected see higher numbers of pilgrims travelling to the country to perform Hajj and Umrah, following the elimination of social distancing measures at the two holy mosques, which are now operating at full capacity.
Saudi Arabia’s retail real estate market
In the retail real estate market, rents for super regional and regional malls decreased by 5 percent and 7 percent year-on-year, respectively, in Riyadh in the first quarter of this year.
On the same basis, in Jeddah, rents on average fell by 1 percent across super regional malls and declined by 5 percent for regional malls.
Developers are increasingly focusing on creating unique F&B and entertainment experiences to attract footfall given the rebound being witnessed in these segments.
For example, Comscore – which reports box office numbers – recently noted that revenues across the kingdom rose by 95 percent year-on-year in 2021.
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