Why Riyadh needs a significant increase in multifamily housing over the next 10 years

Insight by James Lynn, Director of Strategic Consulting – KSA

The Saudi capital is the largest city in the Middle East in terms of both population and land area and currently boasts one of the lowest population densities in the region. The resulting sprawling and unsustainable low-rise landscape require residents to travel long distances during a typical day (it is more than 30-kilometers across the city).

With environmental sustainability being perhaps the most important single issue currently faced by global real estate markets, and the built environment accounting for over 40% of global carbon emissions, it is no surprise that cities across the world are seeking to increase densities to create more sustainable urban forms. Riyadh is no exception, and the city is likely to experience a much higher population density as a result of the significant increase in mid and high-rise multifamily housing stock that is expected to be delivered over the next 10 years.

There is a general recognition that Riyadh’s current urban form is unsustainable in both economic and environmental terms. The government has recognised this situation and has taken the lead in addressing the problem. Many of the major initiatives within the 2030 vision (eg. Green Riyadh, King Salman Park, and Sports Boulevard), stress the need to increase densities and provide more multifamily housing.

Central to the vision (to make Riyadh one of the 10 richest cities in the world unveiled by Crown Prince Mohammed bin Salman at the Future Investment Initiative (FII) gathering in the Saudi capital), is the need to attract more foreign businesses to invest in Riyadh. Program HQ, which requires businesses to nominate the Saudi capital as their regional headquarters, forms a major component of this strategy. If enforced, this program will result in a major increase in the professional expatriate population in Riyadh. Given that many of these professionals have experience of multifamily accommodation overseas, there is likely to be a corresponding increase in demand for this form of development in Riyadh.

The Saudi Vision also targets a major increase in the number of Riyadh residents over the next 10 years (from its current level of around 7.5 million to between 15 and 20 million by 2030). The only way that this massive increase in population can be practically accommodated in a sustainable fashion is through an increase in density, requiring a corresponding increase in demand for mid and high-rise multifamily housing.

Another element in the vision to create a more sustainable and livable Riyadh is an increased dependency on public transport. The Riyadh metro is the ‘crowning jewel’ in this regard, with this $22.5 billion project providing the region’s largest metro (with 6 lines, 84 stations, and more than 176km of track) upon completion, which is estimated to be in 2023. One of the features of the Riyadh metro will be the creation of high-density transit-oriented developments (TOD’s) around key interchange stations.

King Abdullah Financial District (KAFD) is the largest and most ambitious high-rise development in Riyadh, creating a new high-density mixed-use CBD for the city. In the first phase of development, 7 mid to high-rise towers with a residential component have been completed, with a further 17 towers in later phases also offering apartment products, resulting in an end state population of approximately 12,000 residents. KAFD will change the face of Riyadh over the next decade, by introducing a currently unknown level of high-rise multifamily housing.

Perhaps the biggest ‘game changer’ of all, will not be the increased demand for multifamily housing from expatriates moving to Riyadh as a result of Program HQ, but the changing aspirations of younger Saudi nationals. The preference of previous generations of Saudis for low-rise villas has been a major contributor to the current low population density of the Kingdom’s capital city and a constraint on the growth of mid and high-rise multifamily housing. However, this situation is now changing rapidly, with a new generation of Saudis with more exposure to overseas lifestyles seeking a new range of housing products.

Forward looking developers are responding to these changes in the pattern of demand and increasing their delivery of multifamily housing. The increase in density resulting from the delivery of more mid and high-rise multifamily housing will be one of the defining features of the Riyadh residential market over the next decade.

The need to increase residential densities is also central to the government’s bold vision to make Riyadh one of the most livable cities in the world by 2030. Smart investors and developers are already responding to the opportunities created by this vision and are rebalancing their product offering away from low-rise detached villas and compounds to more mid and high-rise residential living options.

In summary, the vision to double the population of Riyadh over the next 10 years, the imperative of creating a more livable and sustainable city, and changes in the social and demographic structure of the Saudi population will combine, driving an unprecedented increase in the level of mid and high- rise multifamily residential accommodation.