Saudi Arabia’s National Industrial Program, Quality of Life Program 2020 and increased market transparency are set to boost Riyadh’s real estate market in the long term
The ongoing mega-project announcements and improvements to government regulations are expected to boost demand for, and enhance the long term performance of Riyadh’s real estate sector, highlights JLL’s Q1 market overview.
The ongoing mega-project announcements and improvements to government regulations are expected to boost demand for, and enhance the long term performance of Riyadh’s real estate sector, highlights JLL’s Q1 market overview. Reforms focused on increasing transparency, enhancing the logistics sector and improving the overall quality of living for Riyadh’s citizens are expected to accelerate the implementation of Vision 2030.
Earlier in the year, the government announced a project of SAR 86 billion (USD 23 billion) to revamp public spaces in Riyadh, aiming to improve the quality of life for the city’s residents. The King Salman Park will promote urban development with green spaces and will include recreational areas for the benefit of the communities and citizens in Riyadh. Along with government initiatives to boost home ownership, this is expected to promote demand for residential units in the long-run.
In addition, the Ministry of Housing launched a rental price index aimed at enhancing market regulation and providing more transparency. This is expected to reflect positively on the housing sector as it could lead to an increase in the volume of transactions.
"With market conditions continuing to soften in the first quarter of this year, large scale announcements aimed at stimulating economic growth are expected to boost sentiment and translate to increased demand for the capital’s real estate. Regulations such as introducing a rental price index are also a market stimulant, as they are expected to improve transparency in the residential sector, which could lead to larger transaction volumes,” commented Dana Salbak, Associate, JLL MENA.
The Kingdom’s National Industrial Development and Logistics Program (NIDLP), which aims to attract SAR 1.6 trillion of foreign investment by 2030 into various industries, is also expected to bode well for the commercial sector.
In Q1 demand for office space remained limited but is expected to rise in the long term as government initiatives encourage private sector participation in the economy. There is a particular focus on SME's, which will boost demand for smaller, flexible office usage.
In the hotel sector, it is expected that the growing demand for domestic tourism and the Kingdom's continuous efforts to enhance the supporting infrastructure will positively reflect on Riyadh’s hotel performance. In Q1 the revenue per available room in Riyadh was the highest in comparison to other cities in the Kingdom, although the ADR’s in general have witnessed a significant decline.
With a strong pipeline in supply, the retail sector witnessed developers diversifying their offerings by introducing increased entertainment outlets, local fashion and home grown F&B outlets. The overall rise in e-commerce across the region will see these developers offering digital experiences to customers through mobile browsing, online shopping and social media.
According to the Kingdom’s Communications and Information Technology Commission (CITC) data, the percentage of internet users interested in online shopping in 2018 increased to 50%, compared with 48% in 2017 and 37% in 2016, benefiting the sector in the long term as more retailers are expected to adopt e-commerce models.
For more information on the office, residential, retail, and hotel sectors in Riyadh, please download the report here.