The Saudi government initiatives have stimulated the residential and commercial sectors in Riyadh, according to CBRE’s latest Riyadh market report.
The residential market is expected to stabilize over the next 12 months despite the increase in upcoming supply, thanks to the government efforts to activate the supply of residential units and stimulate demand through initiatives such the permanent Special Privilege Iqama, which allows non-nationals to purchase real estate.
Read: Saudi Arabia approves draft of special residency system for expats
Higher demand for premium offices
Riyadh is continuing to witness demand for premium office space following the successful implementation of policies, such as Saudization.
Total office stock in the capital stood at 4.1 million square meters (sqm) of gross leasable area (GLA) as of H1 2019, with an additional 2.1 million sqm of GLA expected to be delivered by 2022.
Despite the positive long-term outlook, rental performances have continued to record pressures within both the primary and secondary office locations with rental rates down two percent and five percent year-on-year (YoY), respectively.
However, increased incentives by landlords, discounts for long-term leases, energy-efficient units and unique design offerings are expected to help mitigate declines in the market, the report added.
Hotel occupancy rise
Meanwhile, hotel demand was positively impacted by the arrival of over 2.3 million travelers during Ramadan and Eid season this year.
As part of the plans to further increase the average length of stay and to generate a more compelling all-year-round leisure offering, various new tourism infrastructure developments are being delivered such as Qiddiya and Ad Diriyah Gate Development within Riyadh.
These projects, as well as the complementary infrastructure and real estate development surrounding them, are expected to further boost the hotel sector.
Riyadh’s hotels are expected to continue generating positive occupancy growth, with a modest 0.4 percent increase year-to-date. In total, there are over 4,000 keys currently under construction in the city.
Quality retail destinations
According to the CBRE report, retail demand remains heavily oriented towards quality retail destinations in Riyadh, with prime malls continuing to demonstrate higher occupancy rates and lease rates than secondary locations.
Development activity across the retail sector remains buoyant with more than 1 million sqm of gross leasable area set to be handed over between 2020 and 2021.
Rental rates within the retail sector have fallen with super-regional and regional mall rental rates down 7 percent YoY. However, the introduction of cinemas and other entertainment offerings into the city’s malls is likely to increase footfall in the long term.
The city is expected to see an additional supply of 1.5 million sqm of retail space by 2022, the report noted.
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