Saudi Arabia Office Real Estate Market
Government’s
aim to diversify the economy has attracted the development of manufacturing and
services sector to open their businesses in Saudi Arabia creating a substantial
demand for office spaces in the country. Programs such as Vision 2030 were
launched in April 2016 and National Transformation Program (NTP) was launched
in June 2016 with an aim to develop different sectors of the economy and
country is expected to give positive boost to the economy. Riyadh will continue
to lead the office real estate market in Saudi Arabia followed by Jeddah.
Factors Influencing the Sector of
Office Space Demand in Saudi Arabia
Declining
contribution of oil and gas sector mainly due to fall in oil prices has forced
the government to look for other alternatives that can help in sustaining the
economy. During 2012 to 2016 the share of GDP contribution from mining of crude
petroleum and natural gas declined from ~% in 2012 to ~% in 2016 mainly due to
fall in prices in the global market. The number of people employed in services
sector increased from ~ million in 2012 to ~ million in 2016 registering a
constant increase in number of people in services sector thus creating
additional demand for office space. There has been constant rise in the number
of industrial units operating in Saudi Arabia increasing from ~ units in 2012
to ~ units in 2016.
Riyadh Office Real Estate market
The
total office real estate supply in Riyadh increased from ~ million square
meters during 2013 to ~ million square meters of gross leasing area during
2016, registering a CAGR of ~% during the same period. Demand during the same
period was lower than the supply. Total occupied office space increased from ~
million square meters during 2013 to approximately ~ million square meters
during 2016, achieving a CAGR of ~% during the same period. Completion of
Alajlan Tower (~ Sq m) and Al Tamaiouz Tower (~ Sqm), Olaya towers, MIG tower
made significant contribution during the estimation period of 2013-2016.
Constant oversupply in the market has made the rental stay stable.
Average Rental Rates in Riyadh Office
Real Estate Market
The
rental rate charged by office real estate developers in Riyadh varies across
different building categories as well as location. It is evident that average
rental rates across major business streets such as King Fahad road and Olaya
Street are much higher because of better location and infrastructure
facilities. Within these areas, the rent may vary depending on net area under
lease, whether the company is private or government owned as well as type of
company. As reported at the end of March 2013 rental rates were SAR ~ for Grade
B offices and SAR ~ in Grade A office buildings. Rental rate at the end of 2016
was estimated at the average value of SAR ~. Rentals were lowest in Ayesha bint
Abu Bakkar road and maximum on Northern ring road.
Riyadh Office real Estate Market
Segmentation by Location
Central
Business District was the key offices real estate market in Riyadh accounting
for ~% (~ Sqm) of the net GLA available for leasing and renting in 2016.
Occupancy rate was among the highest with an estimated ~% of the total supply
being under lease. Most of the office buildings are located in close proximity
to King Fahad Road and Olaya Road. The city core area supply ~% of the GLA with
the average rentals in the city core which comprises locations like King Saud
Road, Salahuddin Ayoubi Road range between SAR ~ to SAR ~ per square meter. The
northern part has emerged as the new region for developing office spaces in the
Riyadh. In 2016, only ~% of the office spaces in Riyadh were located in this
area however many new upcoming projects including KAFD and ITCC are located in
this area. Others include the suburban and small business areas which mostly
cater to the local demand of the city. These include offices of local
businesses and SME’s. Together they account for ~% of GLA supply in the city
Future Outlook to Office Demand and
Supply Market in Riyadh
Supply
of office real estate is expected to increase from ~ million square meters in
2017 to ~ million square meters in 2019 which will further rise to ~ million
square meter in 2021. Completion of Riyadh metro will make north a more
attractive option for new and upcoming offices. It is expected that completion
of KAFD, ITCC and Nakhla tower will add an estimated ~ million square meter.
This will make the northern part of Riyadh a key office destination replacing
CBD. Majority of the office space developed in this area is of the A and B
type. Governments plan to cut down the staff by ~% may have negative impact on
the Riyadh office space market, however plans such as Vision 2030 and NTP 2020
is expected to have positive impact on the demand for office spaces in the
city.
Key Topics Covered in the Report
·
Saudi Arabia
Office Real Estate Market
·
Factors Affecting
Saudi Arabia Office Real Estate Market
·
Riyadh Office
Real Estate Market By Demand And Supply In Volume
·
Riyadh Office
Real Estate Market By Supply And Demand Gap Analysis
·
Rental Rate
Analysis In Riyadh Office Real Estate Market
·
Riyadh Office Real
Estate Market Segmentation By Region
·
Future Outlook To
Riyadh Office Real Estate Supply And Demand
·
Case Study Of
Major Office Projects
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