PHOTO
Office rents in Saudi Arabia’s major markets have surged on the back of strong demand resulting from the influx of new foreign businesses.
Leasing rates for premium space in Riyadh went up by approximately 24% in the third quarter of 2023, while other cities recorded increases ranging from 1% to more than 18%, according to a report released on Wednesday by CBRE.
“Throughout the third quarter of 2023, the commercial real estate market in Saudi Arabia demonstrated high levels of demand for quality office space, notably in Riyadh,” said Taimur Khan, Head of Research – MENA at CBRE in Dubai.
The real estate consultancy said that demand is particularly high within the premium segment, where upcoming quality supply is “continually being leased before entering the market”.
“This uptick in demand is resulting from the influx of new international companies, driven mainly by ‘Program HQ’, paired with increased requirements from emerging domestic entities,” Khan said.
“For the remainder of the year, we anticipate performance levels to remain strong due to the quality supply shortage in the market, as additional entities look to set up in the kingdom.”
Saudi’s “Program HQ” initiative aims to attract international businesses to set up their regional headquarters in the kingdom in a bid to boost foreign investment and diversify the local economy.
Rent increases
In its report, CBRE noted there is a drive for quality office space in Saudi Arabia, notably in locations like Riyadh’s King Abdullah Financial District.
Riyadh’s prime rents recorded growth rates of 23.8% in the year to Q2 2023, with rates currently averaging SAR2,617 per square metre.
Grade A rents grew by 12.9% over the same period, reaching an average of SAR1,900 per square metre, while Grade B offices went up by 18.9% to SAR1,529 per square metre.
In Dammam, the Grade A segment saw average rents growing by 7.5% to SAR950 per square metre, while Grade B rents went up by 4.8% to SAR550 per square metre.
In Khobar, Grade A offices cost around 9% more to rent, with leasing rates now averaging SAR1,090 per square metre.
Rents are also going up in Jeddah, which saw leasing rates for Grade A offices rising by 17.9% to SAR1,356 per square metre, while the Grade B segment inched up by 1% to SAR707 per square metre.
(Writing by Cleofe Maceda; editing by Seban Scaria)
