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Saudi Arabia, Riyadh – CBRE Middle East, the global leader in commercial real estate, released its latest edition of the Saudi Arabia Real Estate Market Review for the third quarter of 2024.
In the Office Sector, Riyadh has remained the central focal point of occupier demand in the third quarter of 2024 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.
During the third quarter of 2024, 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 2024, transaction volumes in Riyadh rose by 31% year-on-year reaching 24,000 sales. The increase in Dammam was even higher, with growth of around 37% year-on year 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 SAR6,000/sqm, with more room to grow in the coming quarters. The growth in apartments has been a little weaker at around 4% year-on-year, with rates now averaging close to SAR5,000/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 SAR5,800/sqm.
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 of the year, but occupancy rates still soften slightly. However, Average Daily Rates (ADRs) and Revenue Per Available Room (RevPAR) continued to rise, up 2.3% 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.
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.
Matthew Green, Head of Research MENA, comments: “The Saudi market has continued to benefit from the strong non-oil sector, which expanded by 4.3% in the year to Q3 2024. This has been further supported by the governments continued investment drive, which continues to attract global occupiers to set up operations in the Kingdom. 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”.
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Contact:
Inci Gecekusu
inci.gecekusu@cbre.com