Riyadh City
The infrastructure projects in Saudi Arabia are expected to increase demand for prime real estate, particularly Grade A offices and logistics facilities, Deloitte said in its report, titled “Middle East Real Estate Predictions 2023: KSA Market Review”.
The post-COVID recovery of Saudi Arabia’s real estate sector was catalyzed by an uptick in tourist demand and government spending on infrastructure projects, including investment in King Salman International Airport in Riyadh.
Meanwhile, developers are reimagining the hotel, home and leisure components within their master plans, thanks to shifting customer preferences in the hospitality, residential and retail segments.
As for residential real estate, prices of villas and apartments picked up during the first nine months of 2022 compared to the year-ago period, backed by robust demand for apartments from Saudi nationals.
The total number of residential transactions in Riyadh, Jeddah and Dammam Metropolitan Area (DMA) surged 5% year-on-year (YoY) to 95,000 in the first nine months of 2022, valued at SAR 536 billion.
The following table shows residential supply in Saudi Arabia in Q3 2022:
|
Saudi Residential Supply in Q3 2022 |
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|
Region |
Number of Units (mln units) |
YOY Change |
|
Riyadh |
1.3 |
+3% |
|
Jeddah |
1.1 |
+2% |
|
DMA |
0.5 |
+1% |
In Riyadh, villas remain the preferred residence type for Saudi nationals, albeit apartments are gaining traction amid heightened focus on affordability and the ongoing release of quality developments to the market.
However, market supply in the capital was not entirely in line with current housing needs, despite the emerging shift towards smaller residential units. This is because most large-scale developers have traditionally catered to upper-income households.
Conversely, Jeddah witnessed mounting demand for upper-mid to high-end residential units. Off-plan apartments, with quality masterplans, continued to sell well.
Meanwhile, in DMA, residential supply was mostly situated within the northern regions. The current available stock consists of standalone residential villas and low-to-mid-rise apartment developments, aimed for midscale residents.
The following table shows the average residential sales prices and rents by location in Q3 2022:
|
Average Residential Prices in Q3 2022 (SAR/sqm) |
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|
Region |
House |
Apartments |
||
|
Price |
YOY Change |
Price |
YOY Change |
|
|
Riyadh |
5071 |
+16% |
4679 |
+22% |
|
Jeddah |
4191 |
+29% |
3959 |
+4% |
|
DMA |
3502 |
+4% |
3377 |
+7% |
As for the hospitality market, as of September 2022, occupancy rates stood at 53% versus 39% in the year before. Occupancy in Riyadh averaged 58%, while Jeddah was estimated at 52% for the same nine-month period.
For the nine-month period, the average daily rate (ADR) in the Kingdom surged 22% to SAR 164 ($44) per hotel room, more than most regional and international markets.
Both ADR and occupancy rates advanced YoY, thanks to a market-wide recovery that was boosted by the ease of travel and streamlined visa procedures for tourists.
In Riyadh, the first three months of the year were the strongest for hotel occupancy, reaching 76% in March 2022. Meanwhile, Jeddah hotels posted their highest occupancy performance in May 2022 at 59%.
|
Performance of Hotel Market in Riyadh & Jeddah (Jan. – Sept. 2022) |
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|
Month |
Riyadh |
Jeddah |
||||
|
ADR (SAR) |
Revenue/ Vacant Room |
Occupancy |
ADR (SAR) |
Revenue/ Vacant Room |
Occupancy |
|
|
January |
654 |
465 |
71% |
567 |
264 |
46% |
|
February |
696 |
498 |
72% |
559 |
260 |
47% |
|
March |
779 |
591 |
76% |
804 |
422 |
53% |
|
April |
559 |
212 |
38% |
863 |
436 |
51% |
|
May |
637 |
342 |
54% |
876 |
520 |
59% |
|
June |
578 |
323 |
56% |
883 |
519 |
59% |
|
July |
561 |
235 |
42% |
928 |
495 |
53% |
|
August |
552 |
311 |
56% |
818 |
465 |
57% |
|
September |
642 |
404 |
63% |
816 |
442 |
54% |
Elsewhere, demand for Grade A office properties in Riyadh kept robust, thanks to the government’s focus on positioning the capital as a regional hub for foreign companies. Meanwhile, Grade A units in Jeddah and DMA mainly caters to government offices and public-sector entities.
As of September 2022, office supply in the key markets of Riyadh, Jeddah and DMA came in at 5.2 million square meters (sqm), 1.3 million sqm and 1.3 million sqm, respectively.
|
Office Supply in Q3 2022 |
||
|
Region |
Number of Units (mln unit) |
YOY Change |
|
Riyadh |
5.2 |
+13% |
|
Jeddah |
1.3 |
+19% |
|
DMA |
1.3 |
+2% |
As new quality office inventory enters the market, the existing Grade A units will be pressured due to rising competition. This is bound to result in additional drops in rents and occupancy rates for Grade B stock.
The following table demonstrates average office rents by location in Q3 2022:
|
Average Office Rents by Location In Q3 2022 |
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|
Region |
Average Price (SAR/sqm) |
YOY Change |
|
Riyadh |
1456 |
+3% |
|
Jeddah |
1008 |
(2.5%) |
|
DMA |
920 |
(3%) |
The majority of future retail supply is set to be delivered within the super-regional mall category. This poses a possible market saturation in large-scale retail developments.
During the last 12 months, retail rents across the Kingdom declined. Average regional and super-regional mall rents contracted by 1%.
Prime malls in the Kingdom managed to retain their occupancy levels last year. Lifestyle retail offerings, in specific, saw increased footfall following the lifting of COVID-19 restrictions.
|
Retail Supply in Q3 2022 |
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|
Region |
Number of Units (mln units) |
YOY Change |
|
Riyadh |
3.2 |
+6% |
|
Jeddah |
1.7 |
+30% |
|
DMA |
1.1 |
+22% |
The following table illustrates average regional and super-regional mall rents in Q3 2022 in Riyadh, Jeddah and DMA:
|
Regional & Super-regional Mall Rents by Location in Q3 2022 |
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|
Region |
Price (SAR/sqm) |
YOY Change |
|
Riyadh |
1,500- 4,000 |
(1%) |
|
Jeddah |
2,000- 3,700 |
(1%) |
|
DMA |
1,300- 3,600 |
(1%) |
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