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Government and private investment helps drive visitors to Dammam Metropolitan Area
New visitor experiences and a focus on attracting domestic travellers is encouraging higher levels of tourism interest in the Dammam Metropolitan Area (DMA), according to JLL's Real Estate Market Overview.
The Q2 report states how new visitor experiences in the DMA falls in line with the goal of attracting more visitors as set out in the Saudi Vision 2030. Examples include the newly opened 5,000 sq m family entertainment center in Dammam by the Abdulmohsen Al Hokair Group and government ministries and private entities who are investing in new initiatives.
"The General Entertainment Authority (GEA) launched several events targeting families in the DMA across the Holy month of Ramadan," said Mr Jamil Ghaznawi, national director and country head, JLL, KSA.
"The GEA is committed to positioning the DMA as one of the main leisure and entertainment destination in the Kingdom, whilst seeking to capitalize on the growing demand for domestic tourism."
The DMA real estate market has suffered from the decline in oil revenues and the subsequent slowdown in the Kingdom's economic growth over the past year, says the report. The ambitious plans to diversify the economy away from its current dependence on oil will have a less positive impact on the DMA than other major cities across Saudi.
"All sectors of the real estate market appear to have peaked over the past year and are now poised in the early downturn stage of their market cycle, with rents and prices generally experiencing a small decrease," said Mr Ghaznawi.
Sector summary highlights – DMA
Plans to expand and enhance Dammam International Airport are likely to improve accessibility and the attractiveness of the DMA as an office location, which is in line with Vision 2030.
The total stock of quality office space in the DMA currently stands at nearly 800,000 sq m. Around 29% of this space has been completed over the past 3 years with almost 230,000 sq m delivered between 2014 and 2016 (an average of 77,000 sq m pa).
There were several notable completions in 1H 2017, adding almost 48,000 sq m. These include Adeer tower (14,000 sq m), Al Reziza Tower (14,700 sq m), Al Ajlan (10,000 sq m), Macro Twin towers (4,200 sq m) and the Yasameen Business Center (3,300 sq m).
The office sector softened over the past 6 months, with the weighted average vacancies for Grade A and B properties increasing by 1% to 38%, the highest of any of the major markets in Saudi.
The introduction of the new legally binding Ejar tenancy agreements is expected to increase demand for investment opportunities in the residential sector from both individual and institutional investors. This trend is likely to boost demand in all the major cities in the Kingdom (not just the DMA), compared to smaller cities.
The residential market is growing at an increased rate in the DMA. Between 2014 and 2016, around 17,000 units were completed (at an average of 6,000 units pa).
The residential sector experienced a marginal decline in both sale prices and rentals over the past 6 months. Average sale prices decreased 2% and 1% for villas and apartments respectively.
While there have been a limited number of new entrants as a result of new legislation to date, they should act as a long term benefit, increasing demand in the retail sector in line with the Saudi Vision 2030.
There has been relatively less new stock added over the past 3 years with just 68,000 of retail space completed between 2014 and 2016 (averaging just 23,000 sq m per annum).
A number of notable completions occurred over the first half of 2017, adding 96,000 sq m to the total stock. These include West Avenue Mall (34,000 sq m), Shaikh Avenue (13,000 sq m), Raaka Square (12,000 sq m), Azizyah Plaza (9,200 sq m), Bohaira Plaza (9,000 sq m), Wahat Al Khobar (7,000 sq m), Othaim Markets (6,500 sq m), and Shatea Square (5,500 sq m).
The retail sector remained relatively stable over the past 6 months. Vacancies remained largely unchanged at around 3%.
Almost 343,000 travelers crossed the King Fahad Causeway during the recent four day Eid holiday, with the 116,000 travelers in Wednesday the highest daily flow since the opening of the causeway in 1986. The average daily traffic in 2016 was 31,000. The King Hamad Causeway, a proposed second causeway linking the two countries, is expected to involve a public private partnership (PPP) arrangement exceeding 25 years. While primarily boosting the Bahrain tourist market, this project could result in some development opportunities within the DMA.
The most notable addition to supply over the first half of 2017 was the Radisson Blu Residence, Dhahran (with 92 serviced apartments). This is the second property under the Radisson Blu flag in the DMA and will soon be followed by the Radisson Blu Resort Half Moon Bay that is scheduled to open in later this year.
Hotel performance in the DMA has softened significantly over the past year, as the market remains highly dependent upon travel related to the oil and gas sector.
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