Saudi Arabia’s real estate market ended the year with villa prices rallying in major cities while office rent continued to record strong growth rates, according to CBRE analysis.
Although performance varies hugely from city to city and within various real estate sectors, CBRE is expecting robust results this year.
The differing landscape is typified by Riyadh witnessing a 63.7 per cent increase in residential real estate transactions, compared to a 23.4 per cent decline in in Dammam.
Saudi residential real estate
In the residential sector, total transaction volumes in Riyadh increased by 63.7 per cent compared to the same quarter in 2022.
Jeddah has also witnessed an increase of 23.4 per cent in terms of transaction volumes, while Dammam’s volumes declined by 23.4 per cent.
Average apartment prices across most major cities in Saudi Arabia saw growth, with prices in Riyadh, Dammam and Khobar increasing by 10.7 per cent, 1.8 per cent and 2 per cent.
In Jeddah’s apartment market we saw average prices falling by 1.9 per cent.
In the year to Q4 2023 villa prices in Saudi Arabia demonstrated uniform growth across all key tracked cities.
Average villa prices in Riyadh, Jeddah, Dammam, and Khobar increased on average by 5.5 per cent, 4.8 per cent, 0.3 per cent and 1.1 per cent respectively.
Saudi office sector
Looking at Saudi Arabia’s office sector, in Riyadh, rents have increased across all grades in the 12 months to Q4, 2023, with average prime rent increasing by 20.7 per cent.
Average rents in the capital for both Grades A and B grew by year-on-year by 13 per cent and 22.2 per cent.
As for average occupancy rates, Grade A rate increased by 0.8 per cent to reach full occupancy while Grade B rate stood at 99.4 per cent.
In Jeddah, Grade A office rents increased by 19.7 per cent from a year earlier, whereas Grade B rents slightly increased by 1 per cent.
Occupancy rates for both Grade A and Grade B offices in Jeddah rose to reach 92.5 per cent and 82.1 per cent respectively.
In the Eastern Province, Dammam and Khobar’s office markets saw Grade A increase by 7.4 per cent and 7.2 per cent respectively from a year earlier.
Grade A occupancy levels in Dammam and Khobar registered at 84.2 per cent and 83.6 per cent as at Q4 2023 while the occupancy rates for Grade B offices in Dammam stood at 71.6 per cent.
Saudi hospitality
Looking at the hospitality sector, Saudi Arabia’s hospitality indicators have mostly outperformed their 2019 baselines.
For the full year 2023, compared to 2019, Saudi Arabia’s average occupancy rate recorded a 3.5 percentage points increase with the kingdom’s ADR improving by 12.3 per cent, leading to a 18.9 per cent increase in RevPAR.
On a city level, in the year to 2023, Riyadh gained a 3.1 percentage points increase in its average occupancy rate, while its ADR expanded by 17.5 per cent leading to a 23.5 per cent increase in RevPAR.
In Jeddah, the average occupancy levels saw a hike of 7 percentage points accompanied by a 0.4 per cent growth in its average daily rate culminating in RevPAR growth of 12.9 per cent.
Makkah and Madinah persisted with the positive performances seen over the year with average occupancies rising by 3.9 and 5.6 percentage points, and their average daily rates registering growth of 21.9 per cent and 35.3 per cent respectively.
As a result, Makkah and Madinah witnessed RevPAR growth rates of 29.8 per cent and 46.6 per cent.
In Khobar CBRE said that average occupancy rates expanded by 7.5 percentage points while its ADR declined by 5 per cent, resulting in its RevPAR improving by 8.1 per cent.
In Dammam, the average occupancy rate rose by 7.5 percentage points while its ADR softened by 1.6 per cent leading to an overall increase in RevPAR of 13.1 per cent.
Saudi industrial real estate
During Q4 2023, the Ministry of Transportation and Logistics Services showcased the results of ongoing structural and operational reforms carried out in the pursuit of transforming the industrial and logistics sector.
One of the key deliverables of National Transport and Logistics Strategy (NTLS) has been optimising shipping services offered under the Saudi Ports Authority (MAWANI).
This was accomplished through the addition of 28 new cargo services and enhancing container handling, which propelled Saudi Arabia to 16th place in the Lloyds List One Hundred rankings.
Structural changes such as these are continuing to underpin demand, given this and very limited supply levels, in the year to Q4 2023, average industrial and logistics rents in Riyadh, Khobar, Dammam and Jeddah increased by 17.6 per cent, 17.8 per cent, 11.3 per cent and 6.6 per cent respectively.
2024 Saudi real estate forecast
Taimur Khan, Head of Research – MENA at CBRE, said: “On the whole, demand in Saudi Arabia continues to severely outpace supply across almost all real estate market sectors, hence, we have seen relatively strong levels of performance in 2023, despite some headline economics headwinds.
“In 2024, while supply across many sectors is set to expand, we expect that it will still continue to lag demand materially, as a result we expect that performance levels will remain robust throughout the year.”
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