博鱼体育集团

Performance across Saudi Arabia鈥檚 various real estate market asset classes remains mixed, however the residential market continues to outperform, according to the latest quarterly Saudi Arabia Real Estate Market Review by global property consultants, 博鱼体育集团 Frank.

Faisal Durrani, Partner and Head of Middle East Research at 博鱼体育集团 Frank explained: 鈥淭he post-Covid recovery was never going to be smooth sailing, but we are seeing sustained growth in certain segments of the market. In the residential market for instance, the governments various initiatives, such as Sakani and Wafi are continuing to contribute to an acceleration in home ownership rates across the Kingdom. Furthermore, the government鈥檚 efforts to support growth in the residential market are delivering an exceptionally active development market, with 155,000 new homes scheduled to complete before the end of 2023 across Riyadh, Jeddah and DMA; 100,000 of which are in Riyadh alone. In addition, home values are responding to the buoyancy in demand, with apartment values in the capital accelerating at the fastest rate in the Kingdom, growing by 7.6% year on year, the fastest pace of growth since at least 2017鈥�.

博鱼体育集团 Frank notes that the number of residential transactions in Riyadh are up 77%, year on year and a similar story is playing out on the Red Sea coastal city of Jeddah, where the number of homes sold is up 44% on this time last year.

Office Market

In the Kingdom鈥檚 office market, with the exception of Riyadh, rental rates continue to ebb as demand remains muted.

Durrani added, 鈥淕rade A office rents in Riyadh are being supported by a steady stream of requirements, mainly from newly created public and quasi-public sector entities; however, consolidation activity remains a key theme, echoing global occupier behaviour, which remains centred on rightsizing in the wake of the pandemic. Looking ahead, burgeoning supply is quickly emerging as an area of concern. We鈥檙e tracking nearly 1.8 million sqm due for completion by the end of 2023, 56% of which is planned for Riyadh鈥�.

Clearly domestic demand will help to soak up some of the new supply as economic reforms drive greater business activity, but questions remain on the impact of all the new stock. It鈥檚 likely that Grade B buildings will feel the greatest downward pressure on rents as the flight to quality intensifies, particularly in cities like Riyadh and Jeddah, which will see a 25% and 36% increase in total office supply in the next three years鈥�.

博鱼体育集团 Frank expects total office stock in Riyadh and Jeddah to reach 5.3m sqm and 1.8m sqm by the end of 2023.

Retail and hospitality markets

The retail sector has been one of the most significant casualties of the pandemic, with headline lease rates in prime shopping malls across the country falling by between 1% and 5% over the last 18 months, according to 博鱼体育集团 Frank. In fact, during Q2 alone, rents in the Kingdom鈥檚 best shopping malls declined by between 1.5-3% in Riyadh, Jeddah and DMA.

鈥淗ugely reduced footfall as a result of the pandemic and repeated restrictions on international arrivals has been a double whammy for the retail market. That said, the reopening of the border to tourists from 49 nations this week, combined with 鈥榬evenge spending鈥� from surging domestic tourism may help to cushion the market from further sharp declines鈥�, Durrani said.

According to the Saudi Central Bank (SAMA), consumer spending in Saudi Arabia increased by 2.1%, to around SAR 261 billion in Q1 2021, compared to SAR 256 billion over the same period last year. The food & beverages sector has enjoyed the most significant boost, with spending surging by 35% to SAR 17.4 billion, while spending in restaurants and cafes rose by 58.5% over the same period. This relative outperformance is linked in part to the slight easing of lockdown restrictions, which boosted footfall across the Kingdom鈥檚 food and beverage outlets.

鈥淐ovid has clearly impacted on the hospitality market鈥檚 performance. Yes, international tourism has been severely curtailed, but nationals are traveling in greater numbers around the Kingdom, helping to support the sector in some locations. Jeddah has emerged as a particular stand out market, outperforming the rest of the country. The principal driver has been the resumption of Umrah pilgrimage as well as the recent Eid holidays, with occupancy levels so far this year averaging 50%, well above the national average. The opening of the Jeddah Islamic Port cruise terminal in July, combined with a strengthening supply pipeline is going to further boost the city鈥檚 appeal among domestic tourists鈥�, concluded Durrani.

The total quality hotel supply in Jeddah stood at 13,230 rooms as at the end of May 2021. Taking into consideration only projects that have broken ground, 博鱼体育集团 Frank expects the city鈥檚 room supply to increase by 64% by the end of 2023, to 20,600 rooms, higher than Riyadh and DMA combined.

Lastly, domestic tourism spending on hotels, restaurants and leisure rose by a third last year, according to the Saudi Tourism Authority.

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