Office Sector in Riyadh Witnessing Unprecedented Surge in Demand
Saudi Arabia's multi-faceted real estate market is currently experiencing a dynamic expansion across all sectors, a positive trend backed by compelling recent data and expert insights, according to global property consultancy, Knight Frank. The office sector, notably in the commercial hub, Riyadh, is witnessing an unprecedented surge in demand with occupancy levels soaring to a record 97% for Grade A office spaces, it stated. The residential sector, on the other hand, appears to be facing growing affordability pressures, according to Knight Frank’s analysis. Saudi Arabia's office sector sees a consistent strengthening of demand across its three primary cities - Riyadh, Jeddah, and Dammam Metropolitan Area (DMA). With Riyadh, the commercial hub, witnessing unprecedented demand and occupancy levels for Grade A and B office spaces reaching 97% and 85% respectively, the office sector is the real star of the market, stated the expert. Faisal Durrani, Partner – Head of Middle East Research, said, “The real star of the market remains the office sector. With business continuing to flock to the kingdom from the world over – the number of business licences issued increased by 54% during 2022 – prime rents remain under upward pressure and have climbed by 19% in Riyadh over the last year and by about 9% in Jeddah. Vacancy rates also remain marginal at 6% in Jeddah and just 3% in Riyadh.” “The strong economic growth last year of around 9% - the highest level for any major economy – is driving job creating rates in key centres such as Riyadh, which is resulting in rapidly diminishing stock,” stated Durrani. “What’s more, the pipeline of supply remains slim, with around 800,000 sq m of new offices planned in Riyadh by 2025, for instance. We expect demand to far outstrip this, particularly as businesses remain focused on best-in-class space, which is likely to drive a bigger delta in the performance of Grade A and Grade B rents,” he explained. “For now however, the shortage of space means some businesses are left with no option but to consider Grade B options, which has driven rents for more secondary offices up by 15% in Riyadh and 6% in Jeddah over the last 12-months,” said Durrani. “While the future is very much digital, our data suggests there is still a significant place for physical retail, given it can adapt and offer consumers an enhanced, multi-faceted shopping experience,” noted Pagett.
Tags : Saudi Arabia real estate market dynamic expansion sectors positive trend recent data expert insights global property consultancy Knight Frank Riyadh Jeddah Dammam Metropolitan Area commercial hub Faisal Durrani Partner – Head of Middle East Research