Office vacancies in Saudi Arabia's capital city are likely to increase over the next 12 months with soft demand and further supply in the pipeline, according to JLL.
The real estate consultancy's latest report on Riyadh said that the office sector saw a modest decline in both occupancies and rentals during the third quarter of 2017.
Vacancies have increased by 1 percent over the past year to reach 16 percent and are expected to rise further, JLL said.
Rents have decreased 4 percent over the past 12 months to reach an average of SR1,244 per sq m while demand for space has shifted from new, shell and core offices to fitted-out (previously occupied) offices, as occupiers seek to reduce capital expenses.
Rents are expected to continue to soften for the foreseeable future as supply continues to outpace demand, JLL added.
The report said the market is most likely to witness further declines with the eventual introduction of the King Abdullah Financial District offering a significant amount of office space.
Furthermore, private developers are reluctant to build additional office space given the current climate, JLL noted.
It said demand for office space from international corporate tenants has declined over the past year, as spending on major infrastructure and development projects has been scaled back or delayed.
Q3 witnessed the completion of approximately 67,000 sq m of office space. There are no further major completions expected over Q4 but the level of new supply is expected to increase significantly, with around 650,000 sq m currently scheduled to complete in 2018.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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