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News Release

KSA

Healthy Growth Rates In Residential and Office Sectors In Jeddah During 2014, 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) Jeddah Real Estate Overview report that assess 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: "We have witnessed an improvement and a healthy growth among real-estate sectors in Jeddah comparing to Q4 2013. Attractive demographics, new mortgage law, religious tourism with its positive impact on the hospitality segment, and the government's vast spending on infrastructure are all strong positives for the real estate sector in Jeddah."

He added: "The Saudi economy will be negatively affected by lower oil prices due to the country's highly undiversified economy. The government's planned budget for 2015 shows a deficit for the second time in the kingdom's history, relying more on borrowing from the local financial sector. For the same reason, the current account surplus will drop in 2015 and in the foreseeable future. On the other hand, the kingdom has enough firepower (with over USD700bn in foreign reserves) to ensure its economic growth is sustained despite lower oil prices."

Sector summary highlights

  • Office: Despite almost 100,000 sqm of office space entering the market over the last quarter, mainly due to the completion of Headquarters Tower (75,000 sq m), vacancy rates remain stable at 6%. This reflects continued economic growth and the migration of tenants to higher quality buildings. Average market rents have decreased by a marginal 1% to SAR 990 compared to Q4 2013, but have increased by 10% compared to Q3 2014.  Average rents are expected to increase further, before peaking later in 2015.
     
  • Residential: The total number of residential units in areas surveyed by JLL stood at 769,000 at the end of 2014 (increasing by 15,000 units in the final quarter). Future supply is expected to grow at a healthy rate over the next three years with a further 77,000 units added by the end of 2017, assuming no delays or cancellations. Sale prices have increased ahead of rental rates over the past year, but sale prices have seen a slowdown in the last quarter, with average apartment sale prices actually decreasing by 3.2% and rents have increased by 9.3%. Unlike sale prices, the rate of growth in rental rates has actually increased over the past quarter, as the new mortgage regulations have led to a shift from owning to renting.
  • Retail: High demand for quality retail space has decreased vacancy rates over the last quarter (to 7.4% in Q4). Limited new supply is expected over 2015, resulting in vacancies remaining at current levels. Rents in regional and superregional malls have increased by 4.2% and 10.3% respectively during 2014, while average rents in community retail have decreased by 2.7%. The expansion of Jamaah Plaza, has contributed to the downward pressure on community lease as not all of this new space has yet been absorbed. 
     
  • Hotel: Approximately 200 keys have been delivered over the last quarter bringing the total number of quality hotel rooms in Jeddah to 8,500 keys. A number of projects have been delayed and the expected number of hotel rooms in 2015 is now 1,700 keys but further delays into 2016 are likely. Occupancy rates have remained relatively stable, compared to the same period in 2013 (decreasing by 2% to 76%). ADRs have increased by almost 7% to USD 261 while RevPAR's remains stable during Q4 but are 4% higher than the same period in 2013.

Jeddah 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.


*Hotel clock reflects the movement of RevPAR.

Source: JLL

 

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