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News Release

Riyadh

Hotel, Retail and Residential Rental Sectors Emerge as Strongest Performers in Riyadh Real Estate Market, According to JLL Q1 2015 Real Estate Market Overview


​​​JLL, the world's leading real estate investment and advisory firm, today has released its first quarter (Q1 2015) 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 first quarter of 2015, the Riyadh real estate market experienced continued growth in the hotel, retail and residential rental sectors, balanced by stabilisation in the residential sales and office markets. Recent changes to the mortgage regulations have resulted in a shift in demand away from residential sales to rentals. For the first time in the past few years, the hotel sector saw a marginal improvement of 2% in average daily rate (ADR) and a subsequent improvement of 2.5% in revenue per available room (RevPAR) to USD162. With high levels of new supply scheduled to enter the market in 2015 and 2016, this improvement may be short lived with JLL expecting  a softening of future performance.

Confidence in the retail market remains strong, as reflected in the announcement of multiple new malls, which will add approximately 750,000 sq m to the market in 2018 and 2019. King Salman Bin Abdul Aziz's awarded all state employees a two month salary bonus, leading to an increase in point of sale transactions for the months of January and February by around 20% compared to the same months of 2014."

Mr Ghaznawi added: "Continued delays in the delivery of major projects have stabilized performance in the office market. The delivery of some of the buildings within the King Abdullah Financial District (KAFD) has been further delayed to 2016, and the Information Technology and Communication Complex (ITCC) is expected to be completed later this year. JLL expects that office rentals will remain unchanged until this additional space enters the market in late 2015 and early 2016 and leads to a softening of the market." 

Sector Summary ​Highlights - Riyadh:

  • Office: The office market witnessed no major completions in the first quarter of 2015. New supply is expected to enter the market in 2015 and 2016, with the delivery of the ITCC and some of the buildings in KAFD. City wide vacancy rates have remained stable at 16%, while Central Business District (CBD) vacancies dropped by 1.5% to 8%. Average rents have remained stable since the last quarter for Grade A and B office buildings at SAR 1,275 and SAR 870 sq m, respectively. Prime rents have also remained stable since last quarter at SAR 1,700 per sq m.
  • Residential: The first quarter of 2015 saw the completion of around 5,000 housing units, bringing the total stock to around 976,000 units. The volume of villa and apartment transactions recorded by the Ministry of Justice have decreased around 70% and 33%, respectively, since the new mortgage regulations were introduced in November 2014. These regulations limit mortgages to a maximum of 70% of the sale price and have resulted in a marginal decline (-2%) in the average sale prices for villas and a shift to the rental market. Rentals continue to grow at between 10% and 15% pa. 
  • Retail: The retail sector showed steady growth in the first quarter of 2015. Vacancy rates decreased slightly by 1% and rentals increased marginally by 0.5% across super regional, regional and community centres. In the first quarter, a number of retail locations were completed including the delivery of Alia Plaza located on Al Thumama Road. Other projects have been delayed, resulting in a high level of expected supply in 2016 and 2017.
  • Hotel: DoubleTree by Hilton was the only hotel delivered during the first quarter of 2015, adding 196 keys and increasing the total stock to about 10,100 keys. Major projects expected to be completed in 2015 include Hilton Riyadh Hotel & Residences and Movenpick Hotel in the commercial business district. Year to February occupancy rates have remained stable at 64%, however average daily rates have improved marginally by 2%, compared to the same period in 2014. As a result, RevPAR has improved by 2.5% to USD162 over the first two months of 2015.

Riyadh prime rental clock

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