Ongoing investments in infrastructure and non-oil industries are expected to offset subdued nature of the market in the long term., says JLL
The real estate market in Jeddah softened further across most sectors in Q3, revealed JLL's latest market overview
However, ongoing investments in infrastructure and non-oil industries are expected to offset subdued nature of the market in the long term. There were two notable completions in the office sector in Q3 bringing the total Gross Leasable Area (GLA) to 1.05 million sq m, despite delays in the delivery of a few developments. As a result, office rents dropped further this quarter as vacancy rates continued to increase with the new supply.
New transport infrastructure developments in Jeddah are paving the way for a more connected city which could positively impact future office demand. This quarter, the Haramain High Speed Railway completed its first journey from Jeddah's Al-Sulaymaniyah station celebrating the completion of the largest electric train project in the Middle East. The rail link will aim to connect Jeddah, Makkah and Madinah with improved access to Jeddah's King Abdul-Aziz International Airport, King Abdullah Economic City and Madinah.
"Although the market remained subdued in Q3, the enhanced infrastructure developments towards a more connected city are a step towards attracting increased investment opportunities. The new King Abdul-Aziz International Airport will inaugurate operations in mid-2019, and this completion has the potential to uplift the real estate market performance in Jeddah," commented Dana Salbak, Associate, JLL MENA.
There were no notable residential completions in Q3 2018, leaving the total supply relatively stable at 817,000 units. In line with the Ministry of Housing's (MoH) target of increasing home ownership in Saudi Arabia to 60% by 2020, the ninth installment of the Sakani program was announced in Q3, aiming to deliver 33,000 housing financing options to citizens across the Kingdom.
The rental and vacancy rates in Jeddah's retail sector remained unchanged in Q3 as there were no new further completions. However, cinemas, F&B and entertainment options are still the hot topic of shopping centres and will play a greater role in malls performances going forward. Job opportunities for Saudi Nationals continue to be a focus of Vision 2030 which in turn will boost jobs in the retail sector.
Competition continued to increase in the hotel sector in Q3 as two new hotels entered the market. Hotel occupancies continued to decline in the YT August 2018, while ADRs remained unchanged. In the long run, the hotel market is due to witness positive sentiments due to growing developments in the entertainment sector.