Riyadh’s office market showcased remarkable agility in Q4 2023, with a 31 percent surge in office transactions during 2023 compared to the previous year, Savills Middle East said.
Amid limited prime office space, the Grade A occupancy rate is estimated at 98 percent, with stable rents observed in Q4 2023 after a significant year-on-year increase of 18 percent, the latest report by the international real estate service provider said.
The robust performance of the Kingdom’s real estate sector is aided by the rebound in the country’s economic growth at 5 percent in the quarter, aided by a boost in its non-oil sector performance, the report said.
Ramzi Darwish, Head of Saudi Arabia at Savills Middle East, said the upward trajectory in Saudi Arabia’s commercial real estate sector is expected to continue in 2024, “even though rental values will remain stable in Q4 2023, propelled by Vision 2030’s FDI goals, and sustained economic growth.”
The report said the surge in corporate interest is evident as over 180 foreign firms have secured licences to establish regional headquarters (RHQ) in Riyadh, surpassing the initial target of 160.
Among these are some of the prominent global companies that have established their regional headquarters in Q4 2023, reinforcing Riyadh’s status as a magnet for leading players across industries.
Leasing activity tracked by Savills in Q4 2023 revealed legal firms dominating 40 percent of completed transactions, followed by tech companies, Telecommunication, Media and Technology (TMT) firms, and engineering and manufacturing companies at 20 percent each.
Companies from the pharmaceutical, IT/ITES, and BFSI sectors accounted for 57 percent of total occupier inquiries.
Interestingly, 70 percent of inquiries were focussed on office units smaller than 1,000 sqm, indicating a preference for agile, efficient workspaces, the report said.
Swapnil Pillai, Associate Director, Middle East Research, Savills, said international companies led the surge, contributing to 78 percent of Q4 2023 inquiries, with the US leading demand at 40 percent.
The recently announced 30-year tax relief for regional headquarters has added to the surge.
“The government’s spending on infrastructure projects is creating significant opportunities and attracting global players to establish a strong presence in the city,” Pillai said.
The report said a surge in supply of more than 800,000 sqm of new Grade A office space is likely to be completed by 2025 to respond to the strong increase in demand.
“This should offer more options for tenants, potentially mitigating dramatic price increases while also catering to sustained demand levels,” the report said.
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