JLL reveals market trends set to boost Saudi’s real estate market

Opportunities for the real estate sector to support Saudi’s forecasted economic growth highlighted at the annual ‘2018: The Year Ahead’ event

February 13, 2018

JLL, the world's leading real estate investment and advisory firm, today unveiled the top trends set to impact Saudi Arabia's Real Estate market in the year ahead at an event held in Riyadh.

Following a year of major economic and social reforms, JLL highlighted how new investment opportunities in Saudi Arabia are paving the way for positive economic and real estate growth in a year of 'implementation' ahead, as outlined in the firm's latest real estate report.

Speaking at the event Eng. Ibrahim AlBuloushi, Country Head – KSA, said "GDP is expected to increase 2% and 2.8% in 2018 and 2019, according to Oxford Economics – following the contraction of 0.7% in 2017.

This positive outlook has resulted in many investors, entrepreneurs and businesses exploring new opportunities and areas of investment, giving the real estate market an opportunity to contribute to Saudi's overall economic growth.

In line with the governments' focus on economic diversification ""The non-hydrocarbon sector is expected to lead the growth in 2018 and 2019," he added.

"Oil prices are higher but not enough to reverse the trend towards diversifying the economy by expanding other sectors such as tourism, retail, finance, healthcare and education ," said Craig Plumb, Head of Research – MENA. These efforts to diversify the economy will have a positive long-term impact on the real estate market. Investments aimed at economic diversification being led by the PIF highlight the strong potential for the non-hydrocarbon sector in KSA.

The leisure and religious tourism growth will likely improve the hospitality sector performance. The first phase of tourist visas issued in Q1 2018 will likely drive growth of non-business and religious tourism. Moreover, first signs of reverse, leisure tourism from the neighbouring GCC was witnessed at Saudia Arabia musical and cultural events backed by General Authority for Entertainment in 2017.

On the investment transaction front, sale and leaseback transactions and REITs are expected to continue to grow. While still at early stages – there are ten listed Real Estate Investment Traded Funds (REITs) on Saudi's Stock Exchange (Tadawul) to date, following the Capital Markets Authority's approval in November 2016. The total capital value of listed REITs is approximately SAR 7.2 billion (USD 1.9 billion).

While REITs offer individual investors the opportunity to own stakes in a broad portfolio of real estate properties, JLL believes that there will be a lot more scrutiny involved in terms of the listing requirements going forward. Real estate investors with property and land will need to undertake stringent valuation exercises to ensure that deals flow more smoothly going forward.

The retail sector will also be part of the agenda, with a focus on e-commerce and cinemas in 2018. Traditional retailers can compete by offering services such as home delivery. The inclusion of cinemas will revive shopping malls and performance of retail assets may see improvement as a result.

The Saudi economy is the largest PPP market in the MENA region, with USD 42.9 billion PPPs in the pipeline. The housing sector accounts for 54% of the value of PPPs in the Kingdom.

The event concluded with a breakdown of property market conditions for the four main asset classes (Office, Residential, Retail, Hospitality) in the main cities of Riyadh, Jeddah, DMA, and Makkah.