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News Release


Retail is the only sector of the Riyadh market showing continued confidence and growth in Q4, According to JLL Q4 2014 Real Estate Market Overview

Lower oil revenues should have limited short term impact

​​​​JLL, the world's leading real estate investment and advisory firm, today has released its fourth quarter (Q4 2014) Riyadh Real Estate Overview report that asses the latest trends in the office, residential, retail and hotel sectors in Saudi Arabia's largest city.

Commenting on the Riyadh market report, Mr Jamil Ghaznawi, National Director and Country Head of JLL's KSA, said: "In the last quarter of 2014, we have witnessed the introduction of new mortgage regulations requiring a 30% down payment on all home financings, this has restricted growth levels in the residential market. While in the office sector, new supply has constrained performance and increased vacancies.  Confidence in the retail market remains strong as reflected in the announcement of various new shopping centers, positively effecting rental growth figures. Supply increases in the hotel sector, this showed that occupancy rates were improving and average daily rates remain under downward pressure."

Mr Ghaznawi added: "The Saudi real estate market is heavily dependent upon high levels of government spending and while the more prudent approach is unlikely to have an immediate impact on the market in 2015, it certainly marks the end of a period of rapid increase in spending, which could constrain the growth of the real estate market in the longer term."

Sector summary highlights

  • Office: The total office supply in Riyadh reached 2.3 million sq m by the end of 2014, an increase of 9.5% Y-o-Y. 2015 is expected to witness the delivery of an additional 500,000 sq m of office space, including the much anticipated ITCC and KAFD. Vacancy rates across the city remain relatively low at 16% and 10% in the CBD, but are expected to increase as further supply enters the market. This is also expected to impact rental values which have softened to reach SAR 1,053 per sq m in Q4.
  • Residential: While property values in Riyadh have increased over the past year, the last quarter saw more subdued growth. This slowdown in both apartment and villa sale prices and rents can be largely attributed to new mortgage regulations restricting loan-to-value ratios to a maximum of 70%. This is expected to impact the middle income segment of the population, as new buyers rely heavily on financing and are unable to afford the required 30% down payment. 2015 may therefore see subdued price growth in the residential market.
  • Retail: The retail segment saw no new completions over the last quarter, as only smaller retail centers were delivered (e.g.:,Meem Plaza). Rents have slightly increased in regional and community shopping centres whereas super regional malls saw no increase. Vacancy levels in major malls have slightly decreased (-1%) during this quarter. Delays in the KAFD and ITCC projects have resulted in their retail components being pushed back into 2015 and beyond.
  • Hotel: No new hotels were delivered into the market during the last quarter of 2014, keeping the total stock at 13,390 keys. Occupancy rates registered annual increases to reach 60% and are expected to remain stable over the next 12 months. The increase in occupancy has however been achieved at the cost of lower average room rates. Average daily rates over the year to November stood at USD 237, a decline of around 6% compared to the same period in 2013. The completion of 2,820 room keys in 2015 is expected to increase competition and consequently place further downward pressure on average daily rates.

Riyadh prime rental clock

This diagram illustrates where JLL estimate each prime market is within its individual rental cycle as at the end of the relevant quarter.