Continued government spending on gigaprojects, coupled with growing developments in the entertainment sector, is likely to stimulate demand in the real estate market in Saudi Arabia, as it looks to reduce its reliance on oil, according to JLL’s 2019 mid-year review report.
The Kingdom’s economy accelerated by 1.6 per cent in the first three months of 2019 compared to 1.3 percent in the same period last year, according to official government data.
JLL noted in the report that with conditions remaining soft across most sectors of the market in the first half of 2019, the hospitality and entertainment industries witnessed a number of major development announcements.
These included the revealing of Al Qiddiya’s master plan in Riyadh, aiming to cement the city’s position as the ‘Capital of Entertainment, Sports, and the Arts’, as well as the launch of the Kingdom’s first arthouse ‘Cinema El Housh’ in Jeddah, apart from religious tourism.
“These projects are expected to generate large opportunities for job creation and private sector participation in the economy, particularly in the hospitality sector, while also enhancing the quality of life of the local population,” Dana Salbak, Associate, JLL MENA said.
“As these projects trigger other large scale real estate development activity, and the government actively drives non-oil economic growth, in line with Vision 2030, we can expect more positive impact on the overall market in the long run,” she added.
The report stated that the office market, across main cities, remained under pressure. That said, in the medium-to-long term, corporate demand is expected to pick up as business conditions improve, owing to various new projects such as Riyadh Metro and Dammam’s King Salman Energy Park (SPARK).
The residential sector across Riyadh, Jeddah, Makkah, and Dammam Metropolitan Area (DMA), continued to soften in the second quarter of 2019. However, various government initiatives are expected to stimulate demand in the long-run, according to JLL.
“As the government works towards raising home ownership rates to 70 percent by 2030, this will mean more demand for residential units, and upward pressure on rents and prices, in the long run,” the report said.
The report also stated that rents in DMA’s super regional malls saw an increase of 8 percent in H1 2019 versus H1 2018, as mall owners were able to offer differentiated retail concepts and experiences to attract and retain tenants.
Rents in Riyadh’s high quality super regional malls remained stable for the same reason.
“Overall, the Kingdom’s retail sector is set to benefit from the growth potential presented by reformative changes, and various government efforts to create more job opportunities and support women entering the workforce, thus increasing the purchasing power of the population,” the report concluded.
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