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News Release

KSA

Residential leads while other property sectors show strength in Riyadh and Jeddah

JLL MENA, the world's leading real estate investment and advisory firm, has today released its Q1 2013 Market Overviews of the Riyadh and Jeddah real estate markets


​​​JLL MENA, the world's leading real estate investment and advisory firm, has today released its Q1 2013 Market Overviews of the Riyadh and Jeddah real estate markets that assess the latest tren​ds in the office, residential, retail and hotel sectors of the market in Saudi Arabia’s two largest cities.

Commenting on the reports, John Harris, Co-Head of JLL MENA in the Kingdom said: “All across Saudi Arabia, demand for housing is being supported by increased levels of credit, employment, assistance and confidence.  Demand is also strong across the office, retail and hotel sectors in Riyadh and Jeddah, but wit​h distinct demand drivers and unique risks for developers and investors in each city.”

Summary Highlights – Riyadh:

  • The King Abdullah Financial District (KAFD) is poised to complete the first phase of office, residential, and retail space in Q3. The marketing centre is now open and formal launch events will be held after Eid al Fitr.

  • The Arriyadh Development Authority (ADA) announced the selection of architects and stunning concept designs for stations in the Riyadh Metro. the announcement of the winning consortium(s) to deliver the six-line system is expected imminently.

  • The Ministry of Housing has awarded contracts to develop 7,000 affordable housing units at a location northwest of the airport as the government continues to address the nation’s need housing.

  • The Shoura Council is reported to be considering alternative strategies for encouraging housing development, such as taxes on unused land. 

  • Strong demand in the Riyadh office space market continues to absorb most of the space being delivered. In 2014 we expect to see an increase in the availability of vacated second hand space in the CBD as companies implement their planned moves to new projects in the periphery. JLL expects that that increased vacancy rates and the greater choice available to tenants will maintain downward pressure on rental levels during 2013, especially for Grade B properties.

  • The residential sector has experienced increasing average rents and prices for both apartments and villas in Riyadh. Supply continues to trail demand.  Land prices in peripheral areas have continues to increase, although we perceive less speculative pressure than last year.  

  • Retail trading conditions are good with increasing consumer spending and several new store openings in Riyadh. There was just one mall completed in the quarter, the Ethra mall in Sweidi. Rents have been stable across all segments. There is some concern about the retailers’ ability to continue to expand their networks with the stricter regulation of employment of foreigners.

  • The hotel market continues to absorb the modest supply of rooms delivered in Riyadh over recent years. Occupancy rates were unchanged in 2013 Q1 over the same period of 2012, at 63%.  Following a 12% decline in 2012, there has been virtually no change in RevPAR levels (USD 173) in Q1 2013. 
  • The Jeddah office space market continues to see strong demand from both government and private sector tenants and this has resulted in a reduction in vacancy levels over the quarter from 16% at the end of 2012 to just 12% at the end of Q1. Rents have remained relatively stable across the market and are unlikely to increase during the remainder of 2013 given the significant levels of potential new supply.

  • Villas remain the strongest performing sector of the Jeddah residential market, recording increases in both rents and sale prices during Q1 2013. Conditions in the apartment market remained more stable, with no increase in average price or rents being recorded. There have been no major additions to the retail supply in Jeddah, with most new supply in the form of small projects of less than 100 units.

  • There have been no major changes in the Jeddah retail market during Q1. Average rents remained stable, with a marginal increase in super-regional malls being offset by a similar marginal decline in rents for community malls. JLL do not expect any significant change in rental levels in Jeddah over the remainder of 2013.

  • Jeddah remained one of the best performing hotel markets in the Middle East in 2012. Occupancy levels are now stabilising, with Q1 2013 recording the same occupancy level as Q1 2012 (78%). Average daily room rates and RevPar in Jeddah hotels both recorded an increase of around 10% between Q1 2012 and Q1 2013.
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