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Mon 20 Apr 2020 01:48 PM

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Savills predicts 'strong recovery' for office and retail sectors in Saudi Arabia, post Covid-19

Real estate outfit has positive outlook, provided business resumes as soon as possible

Savills predicts 'strong recovery' for office and retail sectors in Saudi Arabia, post Covid-19

The Ministry of Finance has announced urgent initiatives worth more than SAR70bn to support the private sector. Image: AFP

Real estate giants Savills has forecast a strong second half of the year for Saudi Arabia, provided the kingdom can limit the spread of the deadly Covid-19 virus, to allow business to resume.

As the largest and one of the most significant economies in the GCC, Saudi Arabia was among the first countries in the region to initiate stringent measures to contain the spread of Covid-19, including widespread closures of entertainment facilities, gyms and schools and issuing work-from-home orders.

All international flights to and from the country were cancelled from last month, while major cities including Riyadh, Makkah and Madinah have been under a curfew since the end of March, and Jeddah a few days later.

However, David O’Hara, head of Savills KSA, revealed that close to 80 percent of active enquiries are ongoing, albeit at “a slow pace”, and he believed there was room for optimism during the current crisis.

He said: “Fundamentally, there is a strong demand for investment grade real estate across Saudi Arabia. A few of the ongoing deals have been finalized in the last few weeks, indicating a long-term optimistic view most companies are adopting while considering their real estate requirement in the kingdom.

“Over the last 12 to 18 months, the kingdom has liberalised investments guidelines and opened up its economy to new business sectors. This has led to a surge in enquiry levels from regional and global companies keen to set-up/expand their operations in KSA.

“We anticipate a strong recovery in demand especially across the office and retail sector during H2 2020, provided the current situation is contained and business activity resumes at the earliest.”

The Saudi Arabian Monetary Authority (SAMA) has announced a SAR50 billion program to support the private sector, aimed at promoting economic growth through a package of measures.

In addition, the Ministry of Finance has announced urgent initiatives worth more than SAR70bn to support the private sector, especially small and medium enterprises and economic activities most affected by the virus.

O’Hara added: “The new policy measures will provide a much-needed support to the economy at this critical juncture. In the long-run, the positive impact of these measures will trickle down to the economy and the real estate sector. However, in the short-to-medium term, economic growth is likely to remain muted. As per latest estimates by Oxford Economics, non-oil growth is forecast to grow at 0.7 percent (from 2.8 percent previously) in 2020.

“This may have a negative impact on real estate activity in the country in the immediate future as expansion plans and market entry strategies may be postponed. The existing travel restrictions have already led to key policy decisions being delayed on a few of the ongoing mandates where our company is involved.”

Saudi Arabia currently has the most cases of coronavirus in the GCC, with 9,362 infections so far and 97 deaths.

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