The report titled “Riyadh
Office Market Outlook to 2023 - Improving Oversupply Environment Driven by Rise
in Demand for Premium Office Space and Upcoming Completion of Smart City and
Office Projects” provides
information on overview of the overview of Riyadh city, factors influencing the
Riyadh office market, supply and demand assessment of office market in Riyadh
by segment (premium, grade A, grade B), market insight and performance, average
rental rates by segments, average occupancy rate by region, typical
characteristics of offices in Riyadh. The report also includes competitive analysis of offices in
the Riyadh city and key features and characteristics of office sector in
Riyadh. The report concludes with the future outlook, opportunities and future
development trends; future landscape of office sector and investment
opportunities in this sector; and with key expected upcoming office building
projects in the Riyadh.
Riyadh Office Market
Infrastructure development trends over the past few years in
Riyadh indicates that the capital city is growing towards the Northern areas,
where the properties have the highest sale prices and experience faster
absorption rates. The Eastern region of Riyadh can be utilized for office
purposes as the sale prices are lower in the East of Riyadh along with
potential absorption for new developments thus, indicating strong demand for
this area. The North of Riyadh is evaluated with highest sale prices
along highest absorption rates for office spaces including government and
private firms owing to better infrastructure and the completion of a number of
high profile projects for instance, KAFD, Rafal Tower, and PNU. Some of the major factors
influencing Riyadh office space are strong government initiatives, emergence of
international companies in Riyadh, positive economic development, increase in
women workforce, location factor, expat exodus or Saudization, and physical
conditions of office premises.
Supply and Demand Assessment
in Riyadh
The office market in Riyadh was subdued
in the first quarter of 2019, but is expected to pick up from the next quarter
backed by the government initiatives to promote participation and investment of
private sector in the country’s economy. The government is looking forward to
extend support to more small and medium enterprises for its growth. The
announcement of developing first Special Economic Zones (SEZ’s) in Riyadh which
is to be situated in King Khalid International Airport is another step taken by
the government to attract multinational companies to Riyadh. Premium office
spaces are in high demand as they offer several additional amenities and are
located in the center of city. Rent for grade B offices are reducing over the
years due to falling demand for grade B offices. Riyadh will witness an evolution
of product offerings across its office market. The supply for office spaces
have been consistently increasing over the years to accommodate increasing
number companies in Riyadh. However, the supply has always been ahead due to
subdued demand of occupiers. The excess supply has not only affected the
occupancy rate starkly but has also affected the developers indirectly by
putting pressure on decreasing rents.
Market Insight and
Performance
In terms of performance, market wide
rents and occupancy levels have been under pressure since 2016, with the trend
continuing into 2018 amid increasing levels of supply and subdued occupier
demand. There had been improvement in business sentiment in 2018 with rents and
occupancy likely to remain under pressure as increased demand has met with new
supply. Vacancy rates therefore were expected to rise placing downward pressure
on rents. In this context, it has been witnessed that landlords will continue
offering incentives in order to maintain occupancy levels amid an increasingly
competitive market.
Average
Rental Rates by Segments
The
average rentals of offices spaces are influenced by a number of factors such as
location, connectivity with other parts of the city, company size and budget of
the company. The financial status of the company clearly determines the
location preference and their office layout preferences. The decline in the
rent of offices is majorly due to lack of supply for premium offices. Grade-A
office rents are also underpinned due to shortage in supply. The grade B
offices are not tenant friendly and are not preferred due to difficulty of
accessibility and lack of parking space and would continue to decline. The
lease and rent norms are very stringent and do not provide flexibility hence
there was a consistent decline in the average rents of office spaces.
Average Occupancy
Rate by Region
The occupancy rates of offices in Riyadh are influenced by a
number of factors such as location, commercial activities around the location,
ease in commutation and special amenities. The supply and demand disparity in
the market has further fueled the occupancy rates to remain stable throughout
2018. A number of high profile occupiers are upgrading to premium offices but
the market wide demand of offices in Riyadh is stable. Locations such as King
Fahd Road, Eastern Ring Road and Olaya streets are found to have higher
occupancy rates because of the premium infrastructure and higher commercial
activities available around those areas.
Case Studies of Major Office
Projects in Riyadh
Majority of the office projects in Riyadh were observed in
their developing phase however, the competition scenario is anticipated to
change in the near future along with the expected entry of new players in the city’s
office market. Factors such as government push, emergence of international
companies in Riyadh, positive economic development, and increase in women
workforce, are expected to create a positive impact on the market. Some of
major office projects operating in Riyadh include Home Office, The Elite
Center, Motoon Commercial Towers, The Cube, Aknaz Center which compete on the
basis of various parameters including total build up area, total leasable area,
average annual rental rates, number of offices, number of floors, average
occupancy rate, number of office units and type of facilities and amenities
available in the office.
Riyadh Office Market Future
Outlook
The Return on Investment (ROI) over a commercial property is
highly dependent on the type of office stock. There has been a situation of
excess supply in the market. As a result of which, a decent return can be
expected out of investing in premium class and Grade A properties however,
investing in Grade B and B+ properties can incur losses. Apart from that,
additional office supply from major office projects particularly the KAFD (King
Abdullah Financial District) is expected to enter and increase the supply in the
near future.
Key
Segments Covered:
Type of
Office Units
Premium
Grade A
Grade B
Others
Region
Northern Riyadh
Central Riyadh
Eastern Riyadh
Western Riyadh
Southern Riyadh
Key
Target Audience:
Real Estate Developers
Independent Architects
Government Associations
Government Agencies
Independent Investors
Real Estate Consulting Companies
Time
Period Captured in the Report:
Historical Period – 2013-2018
Forecast Period – 2019-2023
Office Project Case Studies Covered:
Home Office
The Elite Center
Motoon Commercial Towers
The Cube
Aknaz Center
Key
Topics Covered in the Report
Riyadh City Review
Factors Influencing Riyadh Residential Market
Supply and Demand Assessment in Riyadh by Segment (Premium,
Grade A and Grade B), 2013-2023E
Market Insight and Performance
Average Rental Rate of Offices in Riyadh
Average Occupancy rates of Offices
Riyadh Office Market Future Outlook, Opportunities And
Development Trends
Recommendations For Riyadh Office Market
Riyadh Office Market Future Outlook (Is Investment Profitable
Or Not?)
Key Features and Characteristics of Offices in Riyadh
Key Expected Upcoming Office Projects In Riyadh City
Case Studies Of Major Office Complexes In Riyadh
Cross Comparison Within Major Office Properties In
Riyadh
Heat Map Analysis For Riyadh Office Complexes
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report, refer to below link:
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