Riyadh: The retail real estate supply gross leasable area was about ~ million
Sq M in 2013 which further increased to ~ million Sq M in 2018 having the most
growth in Saudi Arabia. The occupancy rate was estimated to be around ~% in
2018. The major supply of space was occupied by super-regional and regional
malls.
Jeddah: The gross leasable retail area
in Jeddah was about ~ million Sq M in 2013 which increased at a CAGR of ~% and
reached ~ million Sq M during 2018. The majority of supply was concentrated
towards super-regional malls which were evaluated to be ~% of the total supply.
The occupancy during 2018 was ~%.
DMA: DMA is a budding market for retail
space and had a little growth in terms of gross leasable area delivered during
the review period. The retail space supply in 2013 was ~ million Sq M, which
increased to ~ million Sq M in 2018 with occupancy being ~%.
Makkah: The majority of the retail
supply in Makkah is concentrated towards the neighborhood shops and the new
developments of super-regional and regional malls are mostly happening on the
outskirts of city. The retail space supply in Makkah was ~ million Sq M in 2013
and it increased to ~ million Sq M. The occupancy in the region was about ~% in
2018.
Saudi
Arabia Retail Real Estate Market Future Outlook And Projections
The
retail sector has a positive outlook in future due to various government policy
changes and initiatives such as allowing ~% FDI in retail sector in 2016,
construction of new properties as per the Saudi Vision 2030 and others.
However, some of the major projects are expected to delay from their earlier
completion timeline. The focus on increasing household expenditure on cultural
and entertainment activities to ~% by 2030 is expected to result in opening of over ~ cinemas and ~ screens across KSA by 2030.
Therefore a number of existing retail centers are undergoing repositioning
and/or refurbishment in order to be able to accommodate these new anchor
tenants.
How Is The Saudi Arabia Hotel Real Estate
Market Positioned?
The
hotel market in Saudi Arabia is undergoing transition due to stern measures by
government as there is dip in crude oil prices. The introduction of expat levy,
increase in Iqama fees and other policies has impacted the investor sentiment
in the region. However, as the government is planning to reduce its dependency
on oil revenues, it is making key investments in developing region as an
entertainment destination which will have a positive impact on the hotel
market. The Vision 2030 focuses on increasing GDP contribution from tourism and
for this the government initiated major projects such as Qiddiya Project, Red
Sea Project, Neom, Amaala Project and others. The total number of tourist’s arrivals
in Saudi Arabia in 2017 was ~ million which increased to ~ million, thus
registering a growth of ~%. As of 2017, the leisure
demand for hotels in major cities such as Riyadh was ~%, Jeddah was ~% and DMA
was ~% of the total demand, the government wants to increase the domestic and
international visitors and at the same time wants to decrease the outbound
tourism of the country. The
number of hotels in Saudi Arabia increased from ~ in 2017 to ~ in 2018.The
number of rooms increased from ~ to ~ with growth of ~% in the period.
What Are The Factors Affecting Hotel Real
Estate Sector In Saudi Arabia?
Tourism in Saudi Arabia: In 2018, the
number of tourists in Saudi Arabia were ~ million. Out of these, ~ million
visited in the month of Muharram and approximately ~ million tourists in the
month of Ramadan. In 2018, about ~ million foreign pilgrims visited Makkah for
Hajj, whereas the domestic pilgrims were ~ million, ~ million in total.
Business tourism has been the major contributor for tourism in Saudi, however
government has implemented various initiatives to enhance the leisure tourism
in the country.
Saudization: Saudization is the Saudi
Nationalization Scheme created to increase the employment of Saudi nationals in
the private sector. As per, Jawazat Saudi Arabia Forum in first quarter of 2018
~ expatriates departed on final exit visa which created more employment
opportunities for Saudi nationals. Foreign nationals employed in Hotel industry
are leaving the Kingdom in response to increase in the cost of living.
Current And Future Hotel Demand And Supply
The hotel offerings have severely increased in Saudi Arabia due
to key interest by several international hotel groups. The supply in the number
of keys (hotel rooms) increased from ~ in 2013 to ~ in 2018 growing at an
average of ~% over the years 2013-2018.
Cities such as Riyadh, Jeddah, Makkah and Madinah are the major tourist’s
attractions and are considerably increasing their hospitality offerings; on the
other hand a number of smaller destinations such as DMA and Jazan are to rise
as attractive opportunity markets.
Marriott International opened the country’s first two aloft
hotels in Riyadh and Dhahran in 2016. In 2017, Rocco Forte Hotels open the
Assila hotel in Jeddah and in 2018 both Hilton and Swiss-Belhotel International
each opened three hotels over the course of the year. Groups including Accor
and InterContinental are also looking to expand into new locations across the
country.
The demand for hotel rooms in Saudi Arabia was estimated to be
around ~ with occupancy being at ~% in 2013. The demand later increased to ~ rooms
in 2018; however occupancy declined to ~%. The demand in number of hotel rooms
witnessed a CAGR of ~% during 2013-2018. The demand will be supported by
increase in the leisure tourism in Saudi Arabia, growth in business tourism and
increase in the number of pilgrims visiting for Hajj and Umrah in Saudi.
Regional Landscape Of Saudi Arabian Hotel
Real Estate Market
Riyadh: Major hotel properties such as
Hyatt Regency Olaya, Ascott Rafal Olaya, Best Western and Fursan Hotel entered
in the Riyadh market during the review period. However, some of the major projects
have been delayed due to the oversupply of hotels in the market. The number of
hotel rooms in 2013 were ~ which increased to ~ in 2018 registering a CAGR of
~%. The RevPAR was estimated to be SAR ~ in 2018.
Jeddah: Major hotel properties such as
Centro Shaheen, Assila, Ritz Carlton Mövenpick Hotel City, Ramada Jeddah
Corniche, Sofitel Jeddah Corniche and others entered in the Jeddah. The number
of keys increased to ~ in 2018 from ~ in 2013. The ADR and RevPAR were highest
in Jeddah in comparison with other cities in Saudi Arabia in 2018.
DMA: Major hotels in DMA are Golden
Tulip Al Khobar Suites, Aloft Dhahran, Radisson Blu Resort Half Moon Bay,
Hilton Garden, Park Inn and others. The number of keys in DMA was ~ in 2013
which increased to ~ in 2018.
Makkah: Major hotel properties in city
are Pullman ZamZam, Anjum Hotel, Swissotel, Makkah Clock Royal Tower and
others. The number of rooms in Makkah was ~ in 2013 which increased to ~ in
2018 growing at a CAGR of ~% during 2013-2018. The ADR was around SAR ~ in
2018.
Saudi Arabia Hotel Real Estate Market
Future Outlook And Projections
The hotel industry in Saudi Arabia has witnessed slowdown in
performance especially during 2015-2017 due to fall in the crude oil prices.
However, the government has implemented corrective measures such as launch of
several projects as per the Vision 2030 to increase the contribution of tourism
sector in the GDP, increase in Iqama (residency) fees and the introduction of
dependent fees in order to boost the Saudi National participation in the
workforce and others. The government has made changes in the Visa regulations
in order to increase the number of tourists especially leisure tourism and
non-religious tourism in the country. They also started issuing Sharek Visa in order
to boost the number of Umrah and Hajj visitors in the country.
How Is The Saudi Arabia Office Real Estate
Market Positioned?
As
per Vision 2030 over ~ mega projects, each project worth at least USD ~ billion
are presently underway or planned for completion as per Saudi Vision 2030 NDP. The
aim of government is to diversify the economy. In 2016, government announced a
SAR ~ billion private sector incentive package to boost the private sector’s
growth and increase the rate of employment in the country. These projects also
includes mega transportation railway projects such as ~ km railway line linking
Riyadh with the Al-Gurayat, King Hamad Causeway, 8 major road connection
projects, Abha airport expansion and others. This provides new opportunities
for Transit Oriented Development. The office market in
Saudi Arabia is witnessing subdue pressure as the rentals have been declining.
The rentals and occupancy level has been under pressure since 2016 and this
trend is expected to continue as there is oversupply of low quality office
spacing. The market has increasing demand for high end office spaces however
there is limited supply of such spaces. This scenario is expected to change in
future as there is a large pipeline of supply of quality spaces and
mixed-development projects.
What Are The Factors Affecting Office Real
Estate Sector In Saudi Arabia?
Migration of Expats from Saudi: Government
is focusing on creating jobs for Saudi nationals. The government has undertaken
various measures for this and one of the most important one has been
implementation of dependent levy of expatriates; due to which a majority of
foreigners have sent their families to their native and evacuated their houses,
thus impacting the overall residential space. The government started imposing
SAR ~ a month on expat dependents in July 2017. The fee is set to reach SAR ~ a
month by July 2020. As per reports, ~ expatriates departed on final exit visa
in first quarter 2018 in comparison with ~ during the same period in 2017. As
per Directorate General of Passports (Jawazat) in Riyadh, average of more than ~
foreign workers has left the country every day since the last quarter of 2016.
Foreign Participation: Saudi Arabia
General Investment Authority is providing benefits such as allowing foreign
investors to take ~% ownership of their companies, Low minimum capital requirement, ability for foreign
investors to sponsor foreign employees and others in order to build the
investors trust in the Saudi market and attract them.
Current And Future Office Demand And Supply
The GDP of Saudi Arabia expanded by ~% in 2014 which was faster
than ~% in 2013. The growth was primarily derived by the positive growth in the
hydrocarbons sector after decline in 2012 and 2013. The office real estate
market has witnesses major transition as the economy of Saudi Arabia is
diversifying dependency from the oil revenue to non-oil sources of revenue. The
supply of office space growth at a CAGR of ~% during 2013-2018 with GLA being ~
million Sq M in 2013 which increased to ~ million Sq M in 2018. Some of the
major office locations in Riyadh are, Cayan Mefic, Kingdom Tower, Business Gate
Granada Business Park, Binayat Center and Raden Center. Major office locations
in Jeddah are Ibrahim Center, Randa Tower, Lilian Towers, and Rovan Plaza. DMA
also lacks a well defined CBD, majority of office space supply is focused in
the Khobar area with the corniche becoming a key commercial location due to
ease of access and proximity to ancillary real estate uses. The demand of gross
leasable area of office space in Saudi Arabia office was about ~ million Sq M
in 2013 which increased to ~ million Sq M in 2018, increasing at a CAGR of ~%
during 2013-2018. The demand for office space has been highly influenced by the
pricing of oil in the international market. The Saudi economy was not
performing well in the early review period as the oil prices were down and
there was decrease in the FDI inflow.
Regional Landscape Of Saudi Arabian Office
Real Estate Market
Riyadh: The office space supply in
Riyadh was estimated to be ~ million Sq M in 2013 which increased to ~ million
Sq M in 2018 at a CAGR of ~% during the period. The majority of the supply is
of the premium grade quality. The completion of major projects such as KAFD,
ITCC and Riyadh Front Projects will create further oversupply of premium and
grade-A office spaces. The rentals have been declining in the market as the
proprietors are keeping rents low in order to improve the occupancy.
Jeddah: The supply of office space in
Jeddah was ~ million Sq M in 2018 increasing from ~ million Sq M in 2013 at a
CAGR of ~% in the period. The majority of the supply is of Grade-B quality.
Completion of projects such as King Avenue, Al-Rawdah Complex, and Jeddah Gate
will increase the presence of high quality spaces. Currently the rentals are
low in the market due to excess supply of poor quality office space.
DMA: DMA has an office space supply of
~ million Sq M in 2018 increasing at a CAGR of ~% from ~ million Sq M in 2013. DMA's
office market is highly dependent on the oil industry. The headquarters of
Saudi's biggest public company Saudi Aramco is located in Dhahran. The region
is also the industrial and logistical hub. The occupancy has been low in the
region.
Saudi Arabia Office Real Estate Market
Future Outlook And Projections
Saudi
Arabia office market is going through transition and is expected to witness
growth in supply due to government’s initiatives such as Vision 2030, NTP,
growth of SME and other factors. The supply for premium and Grade-A office
spaces will grow as some major projects including Neom project, KAFD, ITCC,
Jeddah Towers and others will be completed in the upcoming years thus boosting
the supply. However, the supply and demand gap will keep on fluctuating as
there is oversupply of office space in the region. This will impact the rentals
also, thus keeping them low in the short run. Saudi market will witness change
in office trends due to development of themed office spaces, mixed-development
projects and co-working spaces.
How Is The Saudi Arabia Residential Real
Estate Market Positioned?
The
Residential real estate industry in Saudi Arabia has been facing increase in
demand for affordable housing units. The market has declined due to slowdown in
the economy as the market for oil has been declining. Further, the focus of
government on Saudization has resulted in implementation of policies which are
not expatriates friendly. Implementation of rules such as dependent fees has
resulted in exodus of expatriates. This has further declined the demand in the
residential real estate market. In the beginning of this decade there was
shortage of housing spaces, lack of mortgage law and other problems which were
in the market. It was estimated that Saudi Arabia needed at least ~ Million of
housing units over the coming years to tackle the shortage of affordable
housing. This led to government reforms and the first mortgage law was
implemented in 2012. The government also launched initiatives to build ~ units
of housing over the next few years. The government has been actively working on
the issue of housing and has made various structural changes for dealing with
this issue. It has also undertaken several initiatives for increasing the home
ownership numbers in Saudi Arabia.
What Are The Factors Affecting Office Real
Estate Sector In Saudi Arabia?
Land Transaction by Value and Volume:
The value of land transaction in Saudi Arabia is has decreased consecutively
over the last four years. In Islamic year 1435 the value of land transaction
was SAR ~ billion which declined to SAR ~ billion in year 1439. In 1439,
majority of the transactions was in Riyadh region worth SAR ~ billion which was
followed by Jeddah having transactions worth SAR ~ billion. This decline is
majorly due to poor liquidity, slow economic conditions and newly implemented
land tax in the country.
Taxation Policy in Saudi: In April
2017, government started levying a ~% white land tax in order to help making
well use of the idle residential as well as commercial lands in Riyadh city and
Eastern province. The law will require the owners of lands that are 10,000 M Sq
or more to pay ~% of the land’s value as a tax or to start building on it
within 12 months. A VAT of ~% was further implemented to provide economic aid
to government in 2018.
Current And Future Residential Supply And
Demand
In August 2012, MOH signed a series of contracts worth of SAR ~
billion to develop land plots totaling ~ million Sq M throughout the country.
The Program will provide infrastructure and public facilities to build ~
residential units to accommodate up to ~ people. This increased the
infrastructure projects undertaken by MOH to 57.
The
mid and small scale developers have been delivering majority of the projects in
the major cities such as Riyadh and Jeddah. However, the affordable housing
situation in most of the cities is still inadequate as per the demand. The
supply of residential units in Saudi Arabia was evaluated to be around ~
million units as of 2018.
The demand in the various major cities of Saudi such as Riyadh,
Jeddah and DMA has traditionally grown due to the increase in demand for mid to
low price housing projects which has been majorly overlooked by the developers.
This growth can be attributed to the growing population and early marriage
trend in the country. The developers have overlooked this segment due to the
lower development margins. Government has tried to implement various policies
in order to increase the affordability of the housing and has developed major
projects in order to provide housing in the country which has tried to fill the
demand and supply gap in the region.
Regional Landscape Of Saudi Arabian
Residential Real Estate Market
Riyadh: The housing supply in Riyadh
was evaluated to be ~ million units in 2013 which increased to ~ million units
in 2018 at a CAGR of ~% during the period. Majority of the housing units were
Apartments and Villas and has been concentrated towards the northern part of
the city beyond King Salman Road.
Jeddah:
Housing Supply in Jeddah was evaluated to be around ~ thousand units
in 2018 increasing at a CAGR of ~% from ~ units in 2013. The majority of the
supply has been concentrated towards middle-income housing groups. The majority
of the projects are concentrated in the northern part of the city. The growth
in Jeddah will be mainly due to the growth in population.
DMA: The housing supply in DMA was
about ~ thousand units in 2013 which increased to ~ thousand units in 2018 at a CAGR of ~% in 2013-2018. The supply of
housing units is growing due to government initiatives such as White Land Tax
and Sakani Housing Program.
Makkah: The housing units supply in Makkah
was evaluated to be around ~ thousand units in 2013 and it increased at a CAGR
of ~% reaching to about ~ million in 2018. New residential units are majorly
developing on the outer districts as the main city is already concentrated.
Saudi Arabia Residential Real Estate Market
Future Outlook And Projections
The residential market in the KSA has positive outlook due to
the multiple reforms undertaken by the government such as Saudi Vision 2030 and
the National Transformation Program. These reforms will help in tackling
obstacles such as the high land prices and the imbalance between demand and
supply. There are various projects such as "East Gate Project". This
project consists ~ villas and is further estimated to cost approximately SAR ~
billion. East Gate is considered as one of the leading fully integrated
affordable housing projects in the KSA, extending across ~ million Sq M of land
and providing around ~ residential villas in total. The MOH in 2018 announced
the start of booking procedures in 6 new projects.
Comparative Landscape In Saudi Arabia Real
Estate Market
The
government's vision of reducing the reliance on oil economy and diversifying
into other sectors especially on real estate has resulted in growth of the real
estate industry in Saudi Arabia The market has high competition where the
demand for new properties is increase due to growth in the commercial activities
and increase in competition. Some of the major real estate development
companies operating in the Saudi are Al Saedan Real Estate, Kingdom Holding
Company, Ewaan, Al Ra'idah Investment Company, SEDCO Development, Jabal Omar
Development Company, Makkah Construction & Development Co, Emaar, Dar Alarkan
Real Estate Development Co and Saudi Taiba Investment and Real Estate
Development Co. Competition among developers majorly happens on the parameters
such as land bank, location of the property, upcoming projects, construction
costs, reputation of the company and other parameters.
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Ankur Gupta, Head Marketing & Communications
Ankur@kenresearch.com
+91-9015378249
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Ankur Gupta, Head Marketing & Communications
Ankur@kenresearch.com
+91-9015378249
