Saudi Arabia real estate: Office and residential sectors maintain positive momentum in the Kingdom

In its latest edition of the Saudi Arabia Real Estate Market Review, CBRE Middle East said Riyadh remained the central focal point of occupier demand in the third quarter of 2024. Other cities in the Kingdom, including Jeddah and Khobar, were slightly more subdued in the Office Sector, in line with the government investment focus.

Leasing activity is being constrained by the acute lack of available office space for rent, particularly in Riyadh, where occupancy rates are running close to 100 per cent.

Matthew Green, CBRE’s Head of Research MENA, commented: “The Saudi market has continued to benefit from the strong non-oil sector, which expanded by 4.3 per cent in the year to Q3 2024. This has been further supported by the government’s continued investment drive, which continues to attract global occupiers to set up operations in the Kingdom.

“This has been to the significant benefit of real estate in Riyadh, with office occupancy rates close to capacity, and availability of quality residential properties is similarly tight. Whilst new supply will start to enter the market later in 2025, these dynamics are likely to persist for now.”

Rental averages have increased in Riyadh’s Prime, Grade A and Grade B segments by 6 per cent, 14 per cent and 19 per cent, respectively. The Grade B increase is because repurposing of other real estate uses has remained an ongoing trend. This was particularly evident within the retail sector – which has more occupiable supply ready and available to lease – and landlords looked for quick fixes with conversion into flex and serviced offices.

In Jeddah, Grade A and Grade B office rentals increased by 5 per cent and 21 per cent, respectively.

The residential market continued to demonstrate strong demand fundamentals, with annual improvements in sale transaction volumes across the main metropolitan areas of Riyadh, Jeddah, and Dammam.

In the 12 months to Q3 2024, transaction volumes in Riyadh rose by 31 per cent year-on-year reaching 24,000 sales. The increase in Dammam was even higher, with growth of around 37 per cent year-on-year for the same three-month period in 2023, rising to 3,200 transactions. Jeddah’s increase was lower but still positive, rising by 7 per cent to more than 9,000 transactions.

Average villa price in Riyadh has risen by more than 5 per cent in 12 months, with further value growth anticipated in 2025 as better-quality modern stock is completed and as supply and demand dynamics remain tight.

Villa sales values are currently averaging nearly SAR6,000 ($1,600) per square meter, with more room to grow in the coming quarters. The growth in apartments has been a little weaker at around 4 per cent year-on-year, with rates now averaging close to SAR5,000 ($1,333) per square meter.

In Jeddah, values for apartments are slightly lower, averaging around SAR4,027 ($1,073) per square meter, but villas are notably higher at just over SAR5,800 ($1,546) per square meter.

In the Hospitality Sector, Saudi Arabia’s tourism industry has continued to experience solid growth, with a reported 60 million tourists recorded during the first six months of the year, but occupancy rates still softened slightly. However, Average Daily Rates (ADRs) and Revenue Per Available Room (RevPAR) continued to rise, up 2.3 per cent and 0.7 per cent, respectively.

The strongest market for occupancy growth was Dammam followed by Jeddah.

With tourism firmly at the forefront of Vision 2030, growth in annual visitor numbers is expected to be sustained through the remainder of the year, with expectations to comfortably better last year’s numbers.

In the Industrial and Logistics Sector, The Saudi Authority for Industrial Cities and Technology Zones (MODON) has signed SAR2 billion($530 million) in new deals with ALBADDAD to establish two new industrial cities in Makkah and Al Kharj, which will help to boost the country’s exports, particularly into regional, African, and other western markets.